Americans Hit With Skyrocketing Gas Prices As OPEC Cuts Production
Americans are getting hit with high gas prices as OPEC members and other oil-producing nations have acted to slow production.
Jumping eight cents over the past two weekends, the U.S. national average for a gallon of gasoline reached $2.74 for regular grade. The current average is 30 cents more than what it cost to fill up in 2017 due in large part to rising crude oil prices. The San Francisco Bay area was hit with the highest national average among the contiguous 48 states at $3.63 a gallon, and Baton Rouge, Louisiana, was the lowest at $2.37.
Forecasters do not believe the pain at the pump will subside any time soon. A petroleum analyst predicted the upcoming summer travel season to be the costliest in years, in a statement to a Wall Street Journal reporter published Sunday. “This summer, in terms of average gas prices, will likely be the highest since 2014,” Patrick DeHaan, a senior analyst at GasBuddy, a fuel-tracking app, said.
“There’s been very little question about that,” he added.
One cause for rising prices is seasonal demand as refiners prepare for the transition to the more expensive summer grade gasoline. Greater demand will also inflate prices as summer vacationers take to the open roads.
The spike in gasoline costs are also a direct result of the Organization of the Petroleum Exporting Countries (OPEC) and other producers — namely Russia — reaching an agreement two years ago to limit oil output. Their actions were made to reverse falling global oil prices.
“What we’re seeing now at the pump is reflective of OPEC’s decision in 2016 to cut back on oil production,” DeHaan continued.
While not an official member of the 14-member organization, Russia regularly cooperates with OPEC on short-term deals. Saudi Arabia successfully lobbied the Kremlin to enter into an historic two-year deal to limit oil production after oil prices plummeted from $100 a barrel in 2014 to $30. With the Russia-OPEC deal nearing its termination at the end of 2018, leaders in both camps have expressed strong interest in extending the life of the agreement for a couple of decades, or even indefinitely.
“We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” Saudi Crown Prince Mohammed bin Salman stated on March 26, as negotiations continue. “We have agreement on the big picture but not yet on the detail.”
Russian Energy Minister Alexander Novak went further in saying that the agreement could continue perpetually into the future.
Russia and OPEC have acted in large part to skyrocketing production within the U.S., which, thanks to the advent of hydraulic fracturing, is experiencing a shale oil boom.
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