For the first time since 2010, the average price of a gallon of gas in the United States has fallen below $3, according to AAA’s Daily Fuel Gauge Report. An estimated $40 billion is estimated to be saved this year alone. That’s money that can be put toward other expenses—bigger cars, children’s education, retirement and investing.
But that discount comes with a price. Cheap gas might help consumers and companies in certain industries, but they’re a drag on oil producers, retailers and entire nations. This affects everyone. We live in a global economy, after all.
Since June, crude oil has tumbled 30% to prices we haven’t seen in about three years. For the past 20 days and 60 days, it’s down about two standard deviations. We can blame this dip on a number of things: geopolitics, the slowing of real GDP growth across the globe, a huge oil surplus here in the U.S. and a strong dollar. The strength of the dollar, as you can see, has historically had an inverse relationship with the price of oil.
Recent cuts to our military budget have also affected oil prices. The U.S. military uses more oil than any other institution on earth. Every year it consumes over 100 million barrels to fuel ships, aircraft and other vehicles, but that number is dropping at the same time supply is rising.