Position Paper: Economic Impact of Declining Oil Prices Since the summer of 2014, an excess of supply in the global oil market has led to an unprecedented decline in oil prices. While this will undoubtedly affect nearly every financial market going forward into 2015, it is important to understand the ramifications, both positive and negative, of this particular glut. To find what caused this steep drop-off, it is necessary to look at the drivers of this movement. From a basic economics perspective, oil prices had been inflated prior to this past summer due to high levels of demand due to rapid growth in developing countries (i.e. China), as well as the inability of E&P companies across the world to satisfy this demand. Through the course of 2014, however, both of these drivers began shifting in the opposite direction; high-growth economies began to show signs of maturity, leading to an easing of demand for oil while producers in the U.S. and Canada simultaneously began successfully exploiting shale reserves and alternate sources of extraction, such as fracking, as a source of crude oil. Combined with the lack of cooperation from OPEC to reduce production from the Middle East, oil supply continued to outpace demand. Although alternative means of oil production have been relatively common for some time now, oil prices were being artificially inflated by oil sanctions placed by the United States due to geopolitical conflicts. As these conflicts began to dissipate, the true effects of the economic disparity in the oil market became shockingly clear. To the average American consumer, the first indicator of the changing economic times was the staggering drop in gasoline prices; low gasoline prices tend to be economic boosts – as consumers spend less on gasoline, they have a greater amount of disposable income, which is in turn cycled through the economy.