The Oil Surplus – Fact From Fiction


If you rely on oil and gas to power your car, home, and more, you have likely noticed that prices for these products are significantly lower now than they have been in other recent periods. You may have heard that these prices are a result of an oil surplus, which may come as a surprise- considering mounting concern over the recent decade about running out of fossil fuels, and the ever-increasing focus on developing sources of alternative energy. What exactly is this oil surplus they are referring to in the media, and what does it mean for the average citizen?

The reality of this situation is that prices have been pushed to lower levels due to growing output from oil-producing countries. According to the U.S. Department of Energy, global oil output is growing faster than oil consumption, creating an overabundance of the product in the global marketplace. This trend could be further exacerbated if sanctions are lifted and Iranian oil is reintroduced as a market competitor. This oversupply of oil is bad news for U.S. oil producers, as well as other small producers that, even in the best of times, struggle to compete with the powerful Organization of the Petroleum Producing Countries (OPEC). Furthermore, this oversupply will not last forever; and there is still concern that the world’s oil supply is running out, which will likely cause steep price increases in future years. Over pumping now may even hasten this process.

While there are significant long-term consequences, consumers can enjoy the short term benefits of the oil glut this holiday season. Prices are expected to stay low through the end of 2015, and likely into the first half of 2016, with some forecasts predicting an even longer period of low prices. So enjoy oil and gas prices while you can, but you may not want to go buy yourself a gas-guzzling SUV just yet, as these prices are almost certainly too good to last long term.

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