“Drill, baby, drill!” That was a slogan used during the 2008 Republican National Convention. This slogan was used during the gas crisis at the time. The national average of a gallon of gas was around $4.11 per gallon. Now, the national average is about $2.49 per gallon. What changed?
The easy answer can be found in the slogan and basic economics. First, let’s talk supply and demand. When there is more of something, the price goes down if demand is held constant. When there is less of something, the price goes up if demand is held constant. The key to lower gas prices was that more oil was extracted from the ground.
I remember when the U.S. and Saudi Arabia started pumping more in a price war. It was more than a price war, actually. It was an economic cold war for market share. This is mean both countries were willing to sell oil and gas for cheaper prices in exchange for having more customers, or countries that bought from them
The final result of this battle is not solidified yet. This is because economics doesn’t just end and rivalries don’t just disappear. However, the U.S. has greatly increased the amount of oil it sells to other countries, giving an edge that should help us financially for many generations.
The rapid increase in oil production has been beneficial to all. This remains true in the form of lower gas prices. When we will up our vehicles, we notice these savings at the pump. When we book a flight, we notice that airfare seems much cheaper than it was a few years ago. This has to do, in part, because the price of oil has greatly fallen. Let’s hope it stays this way for a long time! Even if the price rises, one can get ahead by investing in an oil ETF or oil company stock.