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Bad News Abroad Could Be Good News for US Motorists

Problems in Greece, China drive down crude oil.

by on Jul.06, 2015

American motorists could come out the winners in the stand-off between Greece and the EU.

While the future of the European Union may be up in the air, American drivers might be forgiven for finding a silver lining in word that Greek voters rejected terms of a bailout over the weekend.

The results of the referendum, along with the shake-up of the Chinese stock market, have sent global oil prices tumbling. And that, in turn, could soon send gas prices falling in the U.S., experts suggest.

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“Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs, and a potential increase in Iranian oil supply,” Olivier Jakob, senior energy analyst at Petromatrix in Zug, Switzerland, told the Reuters news service.

By midday in Europe, Brent crude oil had tumbled $1.61, or 2.7%, to $58.71 a barrel. U.S. light crude was down an even sharper 4.5%, or $2.57, to $54.36. If those numbers don’t rebound that would mark the lowest the two benchmark crudes have seen in almost two months.

(Motorists already caught an unusual break on gas for the July 4th holiday. Click Here for more.)

The situation in China is worrying investors worldwide and impacting more than just oil traders. With the overall Chinese economy slipping, there are growing signs of a bubble in the country’s booming stock market which some have warned may be facing manipulation by short-sellers. The Chinese government has announced new emergency measures to prop up its markets, which have seen a heavy inflow of cash from small investors in recent years.

Halfway around the world, Greek voters, by an overwhelming 61% margin, backed their own government’s call for a “no” vote in a referendum on a proposed bailout bill leaders deemed much too harsh. But with the rest of the EU so far refusing to budge there is no clear way out of the crisis that could see the collapse of the Greek banking system and that country’s departure from the Euro. Some have warned that Greece may lead the European Union entirely.

(NHTSA plans to punish Chrysler for ongoing safety lapses. Click Here for the latest.)

There are other factors at play in the global oil market. For one thing, production is running at or near record levels among members of OPEC, as well as in Russia. OPEC alone is reportedly pumping 2.5 million barrels per day more than worldwide demand would require, according to various reports.

And then there’s Iran which is approaching a deadline in talks with the U.S. over a deal aimed at reining in its nuclear ambitions. As part of any deal, the Persian government is demanding a quick lifting of sanctions which could see a quick flood of oil from that country, as well.

“With a deal, some supply could creep” upwards, said a report by Morgan Stanley. That could constrain oil prices for as much as a year, the investment firm’s analysts noted.

From a pump perspective, Americans are paying well over $1 less per gallon than they did when oil prices peaked during the spring of 2014, and about $0.89 less than at this time a year ago. According to tracking service, the national average on Monday morning, July 6, 2015, was $2.766 for a gallon of regular no-lead.

That is about a nickel above last month’s average, and well beyond the sub-$2 figure seen in many parts of the country earlier in the year. But barring a sudden resolution in Greece and other positive economic news around the world, motorists in America could be the winners, at least short-term.

(Japan’s Big Three automakers team up to help create a “Hydrogen Society.” Click Here for more.)

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One Response to “Bad News Abroad Could Be Good News for US Motorists”

  1. Jorge says:

    Unfortunately that “NO” vote is going to cost the working class dearly – far more than the realistic bail-out proposed by creditors – that will still need to be paid.

    As far as pump prices are concerned they will vary with fear and exploitation. The pump price often stays high even when the wholesale price drops. Even with a glut we see pump prices increasing in past weeks. Greece’s problems are not likely to lower U.S. pump prices for long if at all.

    The reason prices have been down recently is because OPEC is driving the shale oil producers out as they can’t make huge profits at ~$60 barrel. Many shale oil producers have cut back or stopped further developments.