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Falling Oil Prices, REALTOR® Expense

  • Oil prices have tumbled in the past month, and the reasons are due to supply and demand.  North Dakota is producing oil like mad, now the second biggest oil producing state after Texas, surpassing Alaska.  On the demand side, Europe is not growing and may even be slipping into a recession.  Less production means less need for oil.
  • From near $110 per barrel one year ago, the crude oil price has fallen to $84 on the London Exchange.  American produced oil is priced a bit less, at $80 recently because North Dakota oil is not getting exported and hence staying put as extra supply in the U.S. market.
  • Falling oil prices are leading directly to lower prices at the pump.  Gasoline prices are averaging $2.47 this week versus over $3 a year ago.
  • A typical REALTOR® spent $1,860 in the business use of vehicle in 2013.  (Note there were heavy users with nearly a quarter of REALTORS® spending over $5,000).  If the current low gasoline prices hold for a prolonged period then a typical REALTOR® will spend about $1530, or a savings of $330.
  • Natural gas prices are holding and not falling so do not expect a lower electricity bill for those using natural gas as a source of energy.
  • Consumers are clear beneficiaries of low oil prices.  On the flip side, lower oil prices are not good for producers.  Likewise, countries that are oil dependent for their economy will suffer.  Venezuela, Iran, and Russia are countries vulnerable to societal meltdown if low oil prices persist. Their currencies have all but collapsed already.  For example, one U.S. Dollar could be exchanged for 32 Russian Ruble one year ago.  Now, it commands 40 Rubles.  This means unpleasant inflation and social unrest ahead for Russia.

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Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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