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Oil prices are tumbling — here’s what you need to know

The price of oil is tumbling Tuesday.

The price of American crude fell nearly 3 percent to the lowest price in more than three years, dropping $2.22 to $76.56 a barrel in morning trading. And the cost of Brent crude– the global benchmark – was also tracking downward Tuesday, trading at $82.38 and off by more than 30 percent from prices seen in June.

Why is this happening?

The main reason for the drop in oil is slowing economies in Asia and Europe and a global supply glut, driven by increased American production from the shale boom in places like Ohio and Pennsylvania, as well as more pumping in Libya and Iraq. A more recent factor has been the decision by Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, to protect its market share by allowing prices to drop.

The Saudi move is seen putting pressure on the U.S. fracking industry, as it costs more to extract U.S. oil than it does to take it out of the ground in the Middle East.

What does all this mean? The lower oil prices are already benefiting American consumers who this weekend saw gas prices dip below $3-a-gallon and should provide a boost to economies of oil importing countries, like those in Asia. Big oil has shrugged off the price drop but shale producers may start reassessing their drilling plans and making cuts in their capital expenditures for 2015 if prices remain below $80.