Why are we paying less at the pump?

In March when Iranian oil was boycotted because of suspected nuclear activities, Iran responded with a threat to shut-down the Straits of Hormuz. This tension caused oil to break above $110/barrel pushing gas close to $5/gallon; we were on the verge of a crisis threatening to push oil prices even higher. What occurred subsequently to push prices down? Obama threatened to release oil from the Strategic Petroleum Reserve and Saudi Arabia was enlisted to increase production causing crude oil to promptly drop $5/barrel; it continued to slide to $77/barrel. Further assisting this price decline was Libya quickly adding supply and the sovereign debt crisis in Europe and the slowing Chinese economy which have both contributed to fears of a world-wide economic slowdown. Interestingly, additional downward pressure came from the US. Over the last two years, US oil production has grown from 8.5mm barrels to 10.5 per day; this is more than we purchase from the Saudi’s annually! The Bakken field in N. Dakota has helped push ND ahead of Alaska as the second largest oil producing state, thanks to advances in fracking technology. Overall US oil imports have dropped from 13 mm barrels/day to 9 million – making a positive contribution to our balance-of-trade by some $308 million/day. Additional unintended consequences of the plethora of natural gas in the US include an improvement in air quality as utilities and other industries convert from coal. Conversely however, lower coal shipments are contributing to a decline in rail traffic. Additionally, in the foreseeable future the US should become an exporter of LNG (liquefied natural gas); natural gas costs approximately $2/BTU here and around $15/BTU in Europe and Japan... Disclosure: Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence. This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.