For Mark Roberts’ Use: You may have heard that oil prices have dropped in recent months. But what happened to cause prices to plummet? One causal factor was the amount of crude oil produced by the US. In the first quarter of 2014, the United States surpassed Saudi Arabia and Russia to become the world’s largest oil producer. Another factor is that growth in the world’s oil supply has outpaced demand for the product.

Oil companies are using new methods, such as horizontal drilling and fracking, to produce more oil. In September, US crude oil production reached a 28-year high. Meanwhile, global oil demand has dropped due to economic weakness in Europe and a slowing Gross Domestic Product (GDP) in China. Some analysts believe that the glut in crude oil, and the resulting lower prices, could last until China’s GDP and oil demand picks up speed.

How does this affect your gas prices?

The price you pay at the pump is only partially based on crude oil prices. Consumer demand, refinery capacities, state standards, taxes and other factors also impact your final price per gallon. Therefore, you can’t count on low crude oil prices to automatically produce low gasoline prices, but so far we are enjoying lower gas prices than we have paid in years.

How low gas prices affect the economy.

The American economy is driven by consumers. Since most of us must consume a certain amount of gas – for our commutes to work and school, for example – high gas prices leave less room in the average household budget for spending on other items. When gas prices are low, as they currently are, consumers are able to spend more of their money on other goods and services. Likewise, businesses enjoying lower overhead fuel costs are able to spend more on equipment and employees.

So could low oil prices benefit the economy?

It certainly looks that way, but in order for us to see a true boost to our economy, oil prices would need to stay low for a significant period of time. Global forces will continue to affect the price of fuel, but becoming more energy independent may allow the United States to exert more influence over its own economic destiny.