At the beginning of this year, many energy experts predicted the price of oil would start to rise, but that hasn’t happened. In fact, oil prices dropped to a seven-year low last week.

Oil field. (Svetl. Tebenkova, ThinkStock)

Faith Birol, the executive director of the International Energy Agency says crude prices could continue to fall in 2016, because of lower demand in countries like China, while OPEC has maintained output.

So what does this mean for Garden State residents?

“A continuation of low oil prices will be extraordinarily positive for the New Jersey economy,” says James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

He says the reason for this is cheaper crude means lower home heating and gasoline costs, so “consumers will have fatter wallets, they’re going to consume more, and for individual companies, their energy bills go down, so it gives them resources to do more hiring.”

According to Hughes, the only negative would be for car dealers who sell hybrids, and fuel efficient vehicles – since demand for them will be lower.

“The trend means the typical Jersey driver will easily save $300 or $400 at the pump next year,” Hughes said. “That’s $300 or $400 you don’t have to spend on gasoline, so you can spend that money eating out, you can buy a new pair of shoes, for the average citizen in the state they’re going to be able to consume more, they can spend more money on entertainment, they can save money.”

He also points out cheaper gasoline may mean more road trips for Garden State drivers, which can also be positive for the economy, although it may not be good for the environment.

So why is the price of oil staying depressed? Besides lack of demand worldwide, Hughes says increased fracking has meant “rising production within the U.S., so that was not anticipated three or four years ago.”

Hughes said new exploration for gas in the U.S. has slowed dramatically and even been put on hold in some areas, but if energy prices start to go up “one of the advantages of fracking is you can restart the wells very, very quickly, and there’s a lot of flexibility now in production, so it can really be ramped up quickly if it has to be.”

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