Gasoline prices have plunged almost 90 cents a gallon since April 2014, and Americans are thrilled to be paying almost 25% less to fill up their tanks. Yet many in the mainstream media seem downright unhappy over this energy price windfall.

Since when did the mainstream media care about oil companies? Some warn that shale companies will go out of business. Others warn that Russia will go bankrupt. Some even argue that falling oil prices are a signal that deflation is coming. Some go so far as to say that the big drop in oil prices is bad news. That’s preposterous!

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Gas Prices

Oil prices have plunged simply because the world’s supply of oil has exceeded demand in the last year. US oil production has nearly doubled in recent years to nine million barrels a day, and the Paris-based International Energy Agency (IEA) expects US oil production to rise by more than one million barrels a day next year. And it is this supply increase that is driving down prices.

Saudi Arabia and OPEC have essentially thrown in the towel, surrendering to the inevitability of lower prices from exploding US energy production. It remains to be seen if any major OPEC producers will move to decrease production.

The latest oil price drop of nearly $8 a barrel makes the economic outlook even rosier. Apart from the declining share prices of some oil producers, virtually every other aspect of the world economy benefits, including most world stock markets.

(FYI, the IEA reports that most production in the North Dakota Bakken formation, one of the main drivers of shale-oil output, remains profitable at or below $42 a barrel.)

Here in the US, the oil-price drop is the equivalent of a huge tax cut which is benefitting all Americans (oil company Execs excluded) and especially the middle class. This is not only a triumph of U.S. energy independence, it is a victory for the workings of the free market. Greater supply, not government cartels, is driving down prices.

The American energy revolution, combined with the market forces of supply and demand, is delivering something on the order of a $125 billion tax cut. Not only have wholesale oil prices dropped from about $100 a barrel to $66, but gasoline prices have fallen from near $4 a gallon to $2.78 at last week’s close.

That’s a tax cut, no thanks to the government.

While very few Democrats, including President Obama, supported the entrepreneurial, innovative dynamism of horizontal drilling and hydraulic fracturing, they’ve lately tried to take credit for the oil and gas shale revolution. Thank goodness, no one’s buying it.

Of course, the far-left Democratic environmentalists aren’t sitting still. The EPA is now taking aim at the entire US energy industry with its newly proposed smog rules – probably the most expensive regulations in history – even though the fracking revolution is producing much cleaner energy than ever before.

So what we have is a major energy revolution, and it’s lighting a much-needed fire under the economy. 

Gary D. Halbert is the president and chairman of Profutures, Inc.  Subscription rates for Forecasts & Trends is $197 for 12 issues and may be obtained by visiting his website at www.profutures.com