Oil Prices Drop from U.S. Output, Despite Global Gitters
Price per barrel of oil has dropped $25 a barrel or 23 percent in three months to about $85 a barrel.
- The state of Missouri has the slowest gas price at $2.88 a gallon at the pump.
- The city of St. Louis, Missouri has the lowest gas price at $2.82 a gallon at the pump.
- Other states with low gas prices include: South Carolina, Oklahoma, Tennessee and Mississippi.
Lowest price per barrel since 2010, implications in the news:
- Airlines should have higher valuations at the new fuel prices but the Ebola saga has kept them grounded.
- U.S. disposable income increased $50 billion from the reduction in gasoline prices, less money spent at the pump signals higher retail growth heading into holidays and more money for the economy.
- Prices are trending even lower with the tremendous output from the United States.
OPEC is not reducing oil production at the falling demand levels. Effectively, the cartel is testing how low prices must be to make U.S. shale unprofitable. As we become more efficient in domestic production, that floor will sink and sink for OPEC. It’s going to be an interesting Q4.
The Chinese economy continues to slow down. Germany, Spain, France, and Italy have continuously subpar indices – reflective of stagnate growth. The largest consumer of oil is enjoying its oil and natural gas boom, and a comparatively more hopeful economy than Europe. It’s no wonder that the price of oil is finally falling. Oil consumption is often used as means for measuring economic activity within an economy… So while this drop has great implications for growth in the American economy, one has to wonder, will America’s economic resurgence (granted it continues) be enough to counteract the global effects of steadily falling international consumption?
U.S. equities will continue to be undervalued in a secular market if Europe’s central banks can’t drive down inflation.