SPRINGFIELD, Mass. (WWLP) – We rely heavily on oil to fuel our cars, heat our homes, and even create plastics.
“You have to use it so you got to buy it,” said Marilyn Barnett of Springfield. She said that she has noticed slight changes in gas prices, but nothing that would impact how much she drives.
However, an oversupply of oil has cut prices in half to about $50 per barrel. That is barely enough for some countries to continue oil production. That is why last Wednesday, OPEC, or the Organization of the Petroleum Exporting Countries, decided for the first time in eight years to cut oil exports. The goal: with steady demand and less supply, prices will rise again.
AIC Economics Professor John Rogers predicts that won’t impact how much you pay at the pump. “This is an effort that may stop the price from going lower, but it’s not going to cause the prices to go much higher, so I think we can look forward to pretty stable gasoline and oil prices,” said Rogers.
For OPEC members like Nigeria and Venezuela, oil is their main export, so while we enjoy the effects of low oil prices at the gas pump, low oil prices in those countries could destabilize their economy, and that could impact global politics and security. Rogers said, for example, a struggling Nigerian economy could limit how much the government can spend on security, and lead to more terrorist cells, like Boko Haram.
World politics can also impact oil production. For example, Iran was limited in how much oil could be produced when the United Nations placed strict economic sanctions on the country. Now that the sanctions have lifted, Iran doesn’t want to comply with new OPEC limitations, saying it’s unfair after years of sanctions.
He said a major reason for the oversupply of oil is the increase in production in the United States. Rogers said oil is now competing with alternative energy like nuclear, solar and wind. The 12 OPEC members meet in November to divide up how much each nation will be allowed to export. The U.S. is not a member, so our oil production won’t be limited.