Gas prices are expected to rise in the weeks ahead if OPEC moves forward with plans to cut oil production.
While the price of gasoline remains low across the United States, according to AAA, prices could be headed upwards if an agreement by members of the Organization of Petroleum Exporting Countries as well as Russia holds together.
Experts surveyed after OPEC announced the agreement to curtail production voluntarily said the price of oil could top $60 per barrel, which will raise prices at the pump.
However, analysts will await confirmation that the cartel can stick to an agreement to reduce production and the terms of each country’s participation before making any predictions about pricing.
In last week’s formal trading posting gains but closed out Friday’s formal trading session on the NYMEX down $1.90, settling at $46.06 per barrel.
OPEC announced plans to cut crude oil production by 1.2 million barrels a day to 32.5 million a day, effective in January 2017. The cartel has struggled with production levels for two years and the deal signals a major shift in policy by Saudi Arabia, which is the major exporter in OPEC.
The Saudis initiated major price cuts by continuing to produce oil at high levels in the summer of 2014 in response to rising competition from American producers. They’d hoped the price drop would drive the American producers out of the marketplace. The agreement to curtail production also requires agreement from Saudi Arabia’s traditional enemies, Russia and Iran.
(Major automakers team up on ultra-fast EV charging project. Click Here for the story.)
“We usually see declining gas prices in December because of low demand, but this year prices should be more volatile,” said Mark Jenkins, spokesman, AAA – The Auto Club Group. “The market is currently buying-in on the OPEC news, which could cause gas prices to jump 10-15 cents in the next week and a half.
“How long this trend continues will depend on where oil prices go from here. Some analysts believe higher prices will be difficult to sustain, as non-OPEC countries may be enticed to cash-in by ramping up production, thus leading to even more glut, and sending prices lower as a result.”
Meanwhile, AAA said drivers this year paid the second lowest gas prices for Thanksgiving since 2008, and the national average has steadily dropped prior to the OPEC meeting.
(Click Here for more about whether Trump will choose Big Oil or Big Corn.)
Though not all the details of the agreement are still unclear, the price of gasoline is expected to rise. The average price of gasoline started the week $2.13 per gallon, down one cent per gallon for the week, seven cents over the last month and is only nine cents more compared to a year ago.
Prices have started to rise in the middle of the week hitting $2.16 per gallon, according to AAA’s latest estimates.
Average gas prices were below $2 per gallon in 12 states today including: Missouri, Oklahoma, Arkansas, Kansas, Texas, Mississippi, South Carolina, Alabama, Tennessee, Louisiana, Minnesota and Virginia.
(Obama admin upholds 54.5 mpg rules – but will new Trump admin reverse course? Click Here for the story.)
The West Coast continues to be the most expensive market for gasoline, including the only four states in the nation where drivers are paying more than $2.50 on average.