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U.S. crude oil closed the trading day at $50.04 per barrel, amid growing fears of a worldwide glut in supply. The price dipped as low as $49.77 a barrel at one point, the lowest price for oil since April 2009. In June of last year, it traded for $107.
Ed Hirs, an energy economist at the University of Houston, says it doesn’t take much extra oil to drive prices down. “Since the summer, we’ve seen oil supply increase year over year by about 2 percent — 1 million barrels roughly out of the United States, and another million barrels brought onto the world market from Russia, Libya, Iraq, and Iran,” Hirs says.
At the same time, demand for oil is slumping due to slower economic growth in China and other Asian economies. Those countries have been OPEC’s best customers for the past decade. “OPEC began to lower prices to the Asian economies 18 months ago,” Hirs says, “and now it’s just spread across the entire market, as inventories built unexpectedly.”
Falling oil prices are already taking a toll on the Houston economy, in the form of layoffs across the energy sector.
