MELISSA BLOCK, HOST:
If you are driving anywhere this three-day weekend, you may do a little happy dance at the gas station, or at least you'll take notice gas prices are falling. And that's happening because oil prices have been falling. NPR's Chris Arnold tells us why.
CHRIS ARNOLD, BYLINE: One big reason that oil prices are down, the shale oil boom here in the U.S. Here's a kind of mind-boggling statistic - the U.S., in the past year, has added about a million barrels a day of oil production. That's roughly enough to meet the increase in demand for oil all over the world.
JOHN KINGSTON: The consequences of the rise in U.S. output are just phenomenal.
ARNOLD: John Kingston is a director at the energy research firm Platts. He says the U.S. is not the only country that's been pulling a lot more oil up out of the ground.
KINGSTON: One of the biggest factors has been Libya.
ARNOLD: It turns out Libya's oil fields have made a very quick recovery, despite a civil war.
KINGSTON: Well, Libya back in June was producing maybe a hundred to 200,000 barrels a day. They've really stunned everybody by getting themselves back up to eight to 900,000 barrels a day. That is a lot of oil.
ARNOLD: All that's pushed down the price of oil in the U.S. from $107 per barrel in June down to about $85 a barrel today. The decline's about the same around the rest of the world. Slower growth in Asia and Europe is also playing a role. But what about OPEC? When prices drop, OPEC can cut production and push them back up, right? Well, so far that's not happening. In fact, Saudi Arabia just increased oil production. So Kingston thinks that prices could stay down for a while.
KINGSTON: For the U.S. economy, that's certainly a good thing. The additional purchasing power that's in people's hands as a result of lower gasoline prices - there may be some pain in certain parts of the country but overall this is absolutely a good thing for the country.
ARNOLD: But lower prices cause problems for big oil exporting countries. We mentioned the Middle East but there's also Russia.
WILLIAM POMERANZ: I don't think this could've occurred at a worse time for Russia than right now.
ARNOLD: William Pomeranz is a Russia expert at the Woodrow Wilson Center. He says Russia's economy is very reliant on oil. He says Russia needs to sell oil at around $100 a barrel in order to avoid big deficits. So...
POMERANZ: Based on the sanctions, of declining price of oil, Russia now faces either a recession or years of stagnation.
ARNOLD: One thing is for sure, the world will be watching the next OPEC meeting, to see if member countries can agree to cut back production in a bid to get prices back up again. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.
