The average American now pays less than $2.00 a gallon for gasoline due to cheap energy provided by hydraulic fracturing, or fracking, according to a report by the American Automobile Association (AAA) published Monday.
The current national average gas price is $1.99 per gallon, the cheapest it’s been since March 25, 2009. Just last year in 2015, consumers paid an annual average gasoline price of $2.40 per gallon.
The low gas prices are due to the cheap oil and cheap natural gas-fired electricity provided by fracking and horizontal drilling. Energy prices dropped 41 percent over the course of 2015 due to fracking. Other commodities fell in price as well, but not nearly as much as energy, according to the Energy Information Administration (EIA).
Fracking even helped America surpass Russia early in 2015 as the world’s largest and fastest-growing producer of oil and natural gas. Fracking also takes credit for American oil and natural gas reserves being at their highest levels since 1972.
Consequentially, crude prices have fallen more than 60 percent since last summer due to surging oil production and weak demand. American oil production increased 75 percent over the last seven years.
U.S. consumers spent $370 billion on gasoline in 2014, meaning a 28 percent price drop in gas is equivalent to a $102 billion tax cut for the country. American households likely saved $700 to $750 at the pump in 2015, according to analysis by the EIA.
Most analysts agree that low prices at the pump are also enormously beneficial to American households, which tend to use cash not spent on gasoline to save more or pay down debt. While other analysts claim that the extra money is spent on luxury goods, such as eating out at restaurants. Cheap gasoline, however, disproportionately helps poorer families and other lower-income groups because fuel costs eat up a larger share of their more limited earnings.
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