Oil Prices Drop 10% in 2 Weeks, Saving the US $71 Billion Per Year

Oil prices joined gold and other commodities in a full court market swoon, dropping from a high of $98 per barrel two weeks ago, for West Texas Intermediate, to close yesterday at close to $88 per barrel, a 10.2% drop.  With United States oil consumption at 19.6 million barrels per day, this means a savings to our economy of $71.5 billion per year.  Historically, oil prices at the high level that we have seen these past few years have caused recessions in the United States.  The savings to our economy associated with this recent market drop for oil is a benefit to our economy.  

The reason for the downswing in commodities is the galloping sense that the world economy may not be growing as expected, with the specific news Monday morning that China's growth in the first quarter this year was 7.7%, which is below the 7.9% of the last quarter of 2012, and below expectations that it would be closer to 8% in the first quarter of this year.

As a consequence, silver dropped as much as much as 11.5% in markets on Monday, and gold dropped 6.6% on Monday.  As mentioned, oil has dropped 10.5% in the past two weeks.  Below is the chart of WTI crude oil prices from October, 2012 through yesterday, April 15, 2013. Click on image below for larger view of the graph.