Overseas oil prices dropped again yesterday so we may expect lower prices in New Zealand soon.
Crude oil has fallen to under US$72 a barrel. This is the lowest price in 4 years. In June, the price was US$115 a barrel. There is an over-supply of oil on the overseas market at the moment, partly because of less demand. The low price makes it difficult for some countries like Iran, Russia, Nigeria and Venezuela which need a higher price for their oil. The US, too, needs a higher price for their shale oil which is more expensive to produce than drilling for oil.
Meanwhile, petrol prices in NZ have come down 14c a litre in the last 6 weeks. Experts say that means we can drive an extra 28km on a $50 tank of petrol. Although the New Zealand dollar has dropped a little against the US dollar, it is still quite high and that is part of the reason for the lower petrol price for us.
The drop in the price of oil is good news for Air New Zealand too.
Vocabulary
• crude oil – a type of light oil. It is used by markets for comparing oil prices
• over-supply – too much
• less demand – people are not buying so much oil at the moment
• shale – a type of sedimentary rock