Drilling in the U.S. will keep the price of gasoline at a 12-year low this Labor Day, the Energy Department said Friday.
The U.S. average price of regular gasoline was $2.24 a gallon as of Aug. 29, which is the lowest pump prices have been the week before Labor Day since 2004, according to the Energy Information Administration, the department’s data and analysis arm.
Lower crude oil prices are the “main factor behind falling U.S. gasoline prices,” which have fallen due to high global crude oil inventories and “increased drilling activity in the United States,” the agency said.
The fracking boom has made the U.S. a global leader in oil and natural gas production in just a few years. As production levels grew domestically, it caused demand for foreign imports to fall and forced more oil on the global market. The excess supply made oil prices fall, which made it less expensive for refiners to purchase oil to refine into gasoline and diesel fuel.
Oil producer Saudi Arabia exacerbated the low oil prices by keeping its oil production high. That created a massive oil glut with the intent of forcing U.S. shale producers out of the market by making prices so low they wouldn’t be able to afford to continue fracking. The glut led to hundreds of thousands of job layoffs in the oil patch.
Fracking, or hydraulic fracturing, is generally a more expensive process to produce oil and natural gas than conventional drilling operations, although the price has fallen considerably.
The process entails injecting water deep underground to fracture shale rock and release oil and natural gas.
