Why Does the Drop in Oil Prices Matter?

Oil prices are trading at $33 a barrel and in retrospect, it is almost hard to believe that the price of crude was more than $140 a barrel this summer (gasoline prices were greater than $4.00 a gallon).

Since those highs, oil prices have plunged more than 70 percent and gas prices are down more than 50 percent. If we discount the run up in the first half of the year, we have still seen a 55 percent drop in oil prices since January.

Crude prices matter for a variety of reasons. Lower oil prices help to cushion the ever dwindling pocketbooks of US consumers. In addition, oil has a direct correlation with consumer prices. With CPI falling for 2 consecutive months, the risk of deflation is growing.

Take a look at the strong correlation between the price of oil and consumer prices.

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1 Comments

  1. It is harder for us costumer to buy gasoline not only because of the high oil prices but this is because of the exporter who get rids to have high prices to the consumer. It is one the problem of every country that i ever heard. Hoping that this would resolve by the OPEC. Expecting that this would happened as soon as possible. Because we consumers are suffering for it.

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