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Monday, November 28, 2022

Are Gas Prices Going Down?

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OPEC+ is cutting oil production, which means that we are getting less fuel for our cars and trucks. If you’re wondering if gas prices are going down, it’s important to keep in mind that OPEC+ is limiting production at the same time that oil companies are closing down refineries.

Crude oil prices

Earlier this year, crude oil prices were trading over $120 per barrel and have been in decline since. Prices have dropped by nearly 20% since hitting their peak in March. Traders are nervous about a recession and its effects on oil demand.

According to the International Energy Agency (IEA), global oil supply reached its post-pandemic high of 100.5 million barrels a day in July. Demand has also fallen since the economic slowdown in China, the world’s largest importer of crude oil.

The oil industry is lagging behind in terms of investment capital for oil discovery and processing. This, along with a shortage of storage space, contributed to the price slump. OPEC+, the group of oil exporting states, is set to cut oil production by two million barrels a day starting in the second month of the year.

Traders also believe that an economic recession could cause oil prices to fall. However, a weakening global economy has not been priced into oil prices. Rather, the impact will be felt on the global central banks’ calculation of whether to continue increasing interest rates.

Oil prices are expected to remain stable through the second half of 2022. The International Energy Agency (IEA) recently cut the oil demand forecast by a million barrels a day, due to concerns that China’s economy could slow down.

A number of experts remain cautiously optimistic about the potential rebound in oil prices. However, they note that it will be dependent on steady demand. They also believe that the current price dip will last only for a short period of time.

The United States, which is a major oil exporter, has increased output from shale oil and oil sands. The strong dollar also has a negative impact on oil prices. This makes it more expensive for businesses and consumers in other currencies.

Refineries shutting down

Several refineries are offline or operating at a reduced capacity in California due to maintenance, accidents and other factors. This crimps the ability of the region to meet the demand for gasoline.

As a result, gas prices in California are now up 61 cents per gallon over the last month, nearly breaking the $6.46 mark set in June. While that is still lower than the national average of $4.25, it is not as dramatic as the spike in prices that occurred in the west.

According to the American Automobile Association, six refineries are down for maintenance, one of which is expected to be finished this week. However, the energy commission is not allowed to disclose details about how many outages were planned and how many were unplanned.

While the energy commission can’t tell the public what exactly happened, they have attributed the spike in prices to refinery maintenance. This may sound like a bit of a stretch, but there’s a reason it’s been dubbed the “largest refinery-driven price spike.”

According to the Energy Information Administration, the industry’s utilization rate was over 94% last week. This is a very large number and is likely a result of the continued high demand for gasoline.

As refinery maintenance occurs in a tight market, it’s not surprising that prices rise. This is especially true when unplanned maintenance causes a regional shortage of gasoline supplies.

One refinery has even been reduced in production. It’s unclear whether this will be a long-term effect, or if it will be a one-off incident.

The federal government has not been particularly interested in the oil and gas industry over the past four decades. This has made it harder for lower-income people to afford necessities like gasoline.

OPEC+ plan to cut oil production

OPEC+, the group of 23 oil exporting countries, announced a plan to cut oil production by 2 million barrels a day, starting in October. The move, which came in response to rising inflation, slowing growth, and fears of a recession, could strain U.S.-Saudi relations.

Saudi Arabia is the world’s largest oil exporter and its de facto leader in OPEC. But the country has been criticized for its human rights record and actions in the war in Yemen. The murder of journalist Jamal Khashoggi has further damaged U.S.-Saudi ties.

The OPEC+ decision comes amid a global recession. As a result, global demand for oil is expected to fall. This is also bad news for Russia, OPEC’s largest non-OPEC partner. Russia is also expected to see its global exports of crude oil suffer.

The OPEC+ plan to cut oil production will put the group in a position to bolster oil prices. However, it will likely be unpopular in Washington.

Some Democrats in Congress are calling for the United States to cut its military support for Saudi Arabia and other Gulf nations. Others are calling for a re-examination of U.S. ties with key oil producers.

Saudi Arabia has been in the spotlight because of its relations with the United States. It is deeply unpopular with many Americans. However, it also leads the OPEC+ group.

OPEC+ delegates will meet in Vienna on Wednesday. The group will decide how much crude oil it wants to sell on the global market.

The decision comes as the price of crude oil fell 40% in the past two months. It has traded below its summer peak of $120 a barrel. This has caused gasoline prices to rise in the U.S. While lower prices will reduce costs for consumers, higher inflation could also lead to a recession.

High rate of gasoline production

Several factors affect the price of gasoline, but three major factors drive the price upward. These factors include refinery outages in the Midwest and west coast, the war in Ukraine, and the formation of the OPEC+.

The Organization of Petroleum Exporting Countries (OPEC+) is a global coalition of 23 oil-exporting countries. It meets regularly to determine the amount of crude oil that it will produce. The group is expected to cut oil output next month by 2 million barrels per day. This decision has prompted some analysts to expect a price hike.

Gas prices in the United States are expected to rise in April. The gap between wholesale gasoline futures and retail prices has increased to $1.25 per gallon, which is higher than average over the last five years.

In April, the EIA reported that the average retail price for gas in the U.S. was $3.01 a gallon. This is largely driven by the higher price of crude oil, which is the substance from which gasoline is derived. However, the remainder of the cost of a gallon of gasoline is determined by distribution and marketing costs.

According to the University of Michigan consumer confidence index, consumer sentiment dropped to an 11-year low in early March. In the past few weeks, demand for gasoline has begun to rebound. The four-week moving average for gasoline demand is 2.4% lower than last year.

The United States produces a significant amount of oil, with production expected to reach 11.3 million barrels a day by the end of 2020. However, supply is expected to remain limited for some time after the formation of OPEC+.

Refinery outages in California have pushed gas prices up in that state. During the summer, demand usually spikes. However, cold weather usually corresponds with lower demand for gasoline.

Stock builds in the U.S.

Despite a relatively benign summer, stocks were up by more than a million barrels in the past few months, but that’s not to say the likes are not there to be found. A slew of large-scale tankers and a couple of refineries in town have helped to alleviate some of the pain. The aforementioned novelty also helped to drive a spike in refinery and pipeline productivity and yields. Combined with the aforementioned improvements, crude production jumped to an all-time high in August. This helped to boost the number of active wells in the past few months to a record level of 568, as well as boost production by a couple of hundred thousand barrels. The aforementioned improvements have also helped to drive down costs and reduce the likelihood of snafu in the near future. Moreover, the aforementioned improvements have helped to boost prices by a couple of dollars per barrel in the past few months.

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