1. What has caused this major drop in oil prices?
The reasons why Oil prices are falling down are twofold, they are due to the simple economics of demand and supply.
First of all, we can observe a weak demand in many countries due to insipid economic growth, coupled with surging production. Developing countries and the economies of Europe are becoming less oil dependent thanks to the technology, cars are becoming more energy-efficient. So the demand for fuel is logically decreasing. Added to this is the fact, on the supply side, the oil cartel OPEC is determined not to cut production as a way to prop up prices. Moreover, countries like Saudi Arabia, Nigeria and Algeria are now competing to the Asian markets so producers had to drop prices and USA has gave up the imports as its domestic production has doubled these years. Finally lot of competitors are rising such as Canadian, Iraqi or even Russia and they manage to increase their oil production and exports every year.

2. What economic impact would these lower prices have on the world economy including the USA?
Like in every changing situation, there are winners and losers.
Consumers all around the world will enjoy a main benefit: less expense for the gas! Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it's been in years. For example, the price of the gallon, in average, fall from $3.28 a year ago to $2.07 and this drop benefit to lower-income groups in America. China, which is set to become the largest net importer of oil, should gain from falling prices and India which import almost all its oil is totally benefit from this situation. Alongside Saudi Arabia, Gulf producers such as the United Arab Emirates and Kuwait have also amassed considerable foreign currency reserves, which means that they could run deficits for several years if