Americans will go to great lengths to save a buck. Some will clip coupons to save a few pennies here and there on everyday items. Others will get up early to wait in long lines in order to score a great deal on some new tech gadget. The list of ways we try to save goes on and on, each requiring a little extra work on our part.
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I've found an even easier way to save big bucks in 2015. Just fill up your gas tank. With gas prices more than a dollar cheaper this year the average American family is projected to save $700 in 2015 without changing their habits one bit. Here's why you'll save a small fortune at the pump this year.
Thank you fracking!
Hydraulic fracturing, or fracking gets a bad rap. However, the 60-year old process has been helping to supply oil and gas to America for decades. What's new about the process in recent years is that it has been combined with horizontal drilling and other new technologies to unlock oil and gas that was thought to be forever trapped in tight rocks more than a mile below the surface. Thanks to the hard work and can-do attitude of American oil companies, they've perfected the process and reversed decades of declining oil production in the U.S.
Because of that surge of oil production in recent years we've become much less reliant on OPEC's oil. We can see that in the following chart, which shows just how dramatically we've cut our oil imports from OPEC.
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What's also worth noting is that prior to the most recent boost in domestic oil production our reliance on OPEC's oil was growing, which was siphoning off money from our wallets into the coffers of OPEC's member nations. One prime example of this wealth drain is seen in Saudi Arabia as it built up reserves totaling more than $700 billion due to budget surpluses even after oil revenues funded over 80% of its government's annual budgets. While not all that money came from Americans we've sent a lot of our wealth overseas for oil
This makes what oil companies in the U.S. have done to break OPEC's grip on the oil market a real game-changer. That's evident by the fact that OPEC is no longer worried about keeping oil prices high to further flood its reserves with cash, but instead has shifted its focus on keeping its share of the oil market. While this price war isn't officially being waged to upend U.S. oil companies it has had a dramatic impact on the industry as jobs are being lost and companies are struggling to survive. That pain aside, the OPEC policy shift has had a real positive impact on the rest of Americans that are benefiting from the resulting savings at the pump.
The $700 windfall
The surge in domestic oil production really flooded the market with oil, especially after OPEC shifted its policy and maintained its supplies, causing oil prices to drop 50% from this time last year. That's cutting the price we pay at the pump by over a dollar per gallon from where prices were last summer, with the expectation being that the national average this summer will be down to $2.40 a gallon according to the U.S. Energy Information Administration, or EIA. That's the cheapest summertime gasoline price in six years. Those dollars will really add up and could total as much as $700 per family in savings from what the average American household paid for gasoline last year. That would put the annual motor fuel spending per family at its lowest level in 11 years.
Source: U.S. Energy Information Administration
Of course this projection assumes that U.S. benchmark oil prices remain at or below the EIA's current estimate of $52.50 per gallon for 2015. There's a lot of debate whether or not that will happen as demand for gasoline is picking up and is now projected to increase by 150,000 barrels per day, which is 1.6% higher than last year. This demand increase is almost double what the EIA previously estimated and this incremental demand could lead to higher oil prices later this year. While that would lead to higher prices at the pump, prices are unlikely to test previous highs anytime soon.
For the time being at least we've broken OPEC's hold on our wallet. Thanks to fracking we've unlocked enormous quantities of oil, which means less money is going into OPEC's bank account and more of it is staying in our pockets. These savings likely won't last forever, which is why you might want to think about investing your savings at the pump instead of splurging so you'll at least have something to show for it if gas prices start to get out of control again in the future. For a great investment idea, just check out the link below.
The article This is the Easiest $700 You'll Save in 2015 originally appeared on Fool.com.
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