HOUSTON, Texas — Some Texans are seeing gas drop below $2 a gallon as Saudi Arabia continues to inundate the U.S. with cheap oil.
The first gas station in the U.S. to offer such a low price was in Oklahoma City, according to the Associated Press (AP). It didn’t take long for Texas to pick up on the trend, however, and soon a San Antonio-based gas station was also selling their product for under $2 a gallon.
While the nationwide average is still considerably higher — $2.71 per gallon — gas prices are steadily dropping everywhere. And the prices will only keep falling, the AP reported.
Just earlier this year, a gallon of gas at an average U.S. gas station cost $3.70.
While low gas prices seem like a great thing to most Americans, it could spell trouble for the Texas economy. The Lone Star State, where fracking is king, is the energy powerhouse of the U.S. The state was set to produce more oil than all OPEC countries besides Saudi Arabia this year.
But the Saudis don’t like competition.
As to not lose market share to the American fracking boom, Saudi Arabia has inundated the U.S. with cheap oil. The intention is to push U.S. producers out of the market space. So far it has worked. “Hundreds of billions of dollars in equity value from the market capitalization of U.S.-traded securities” have already been wiped, according to the Dallas Morning News.
Crude oil is currently selling for around $70 per barrel. At this rate, much U.S. drilling could become unprofitable. Saudi Arabia, on the other hand, is able to produce oil for $20 per barrel.
While Texas-based gas companies will likely cut back on exploration — which could result in layoffs across the board and a slump in the state economy — there are several factors working in the Lone Star State’s favor. Because fracking is technology-driven, it could help cushion Texas from a significant bust. The
Diversification in the Texas economy has also helped prevent economic depression. In recent years, Texas’ economy has expanded far beyond oil and gas. The state has become a leader in the industrial, technology, and manufacturing industries — just to name a few.
Follow Kristin Tate on Twitter @KristinBTate.