Energy Economy

OPEC Cuts Are Lifting Gas Pump Prices

The price of gasoline on Monday morning was up six cents compared with last week’s pump price for a gallon of regular gasoline. Compared with the same day last year, prices are nearly a 14 cents a gallon higher.

Average pump prices rose in 37 states over the past week, according to GasBuddy, as crude oil prices rose more than $5 a barrel since the OPEC agreement was announced last Wednesday. The sharp increase in crude prices indicates that traders are taking seriously the cartel’s agreement to cut production by about 1.2 million barrels a day beginning in January.

Senior petroleum analyst at GasBuddy, Patrick DeHaan, said:

If I had a nickel for every time OPEC said it was going to cut oil production, I could probably buy everyone free gas on Christmas. While OPEC signaled at its meeting in Vienna that it would cut crude oil production, it also created a committee to monitor the reduced production quotas — addressing the issue of cheating — an issue that has been pervasive for the organization. For now, oil markets have bid up oil prices in a fury believing the agreement, which comes into force in January, is exactly what’s needed to balance supply and demand. I, however, believe this rally represents a balloon that’s filled with too much air and risks a correction (popping the balloon) that may be seen in due time.

As I wait for the oil price balloon to burst, the rally in oil prices will lead to higher gasoline prices in much of the country over the next couple of weeks as prices catch up to the feverish rise in oil prices. From the east to the west, average prices could rise 5-15 cents a gallon in the week ahead, so motorists should plan accordingly and expect [an increase] in nearly all communities. OPEC seems to be taking the role of the Grinch this holiday season: the era of low oil prices may be over for now

Monday’s most common price for a gallon of regular gas in the United States was $2.099, up 10 cents compared both with a year ago and with last week.

There are no U.S. gas stations charging more than $4.00 a gallon for gas, and just 0.1% are charging between $3.50 and $4 a gallon. No gas station is charging less than $1.50 a gallon, and more than 90% are charging between $1.75 and $2.50 a gallon.

The five states where average gasoline prices were cheapest were Arkansas ($1.946), Oklahoma ($1.949), Texas ($1.952), Kansas ($1.972) and Missouri ($1.972). Just four other states posted average prices below $2.00 a gallon: South Carolina, Mississippi, Alabama and Colorado.

The five states posting the highest averages were Hawaii ($2.829), California ($2.671), Washington ($2.587), Alaska ($2.515) and Washington, D.C. ($2.444).

Crude oil prices were up about 0.8% Monday morning, with WTI crude oil for January delivery trading at $52.06, after closing at $51.68 on Friday.