Price Of Oil Headed Back Up, Gasoline Hikes Will Follow

In the world of oil, Saudi Arabia is the tail that wags the dog. For several years, it has stubbornly refused to cut oil production in the face of falling oil prices in order to maintain its dominant share of the oil market. It is also part of a strategy to drive tar sands and fracking producers out of business. Those non-traditional sources of oil are far more costly than pumping from reserves under the Arabian desert.

At the end of November, OPEC and other oil producing nations agreed to cut global oil production by 1.2 million barrels a day at a meeting in Vienna, according to OPEC Conference President and Qatar energy minister Mohammed Bin Saleh Al-Sada. That agreement sent oil prices above $50 a barrel for the first time in years. Higher oil prices will eventually lead to higher prices for gasoline.

“This is a much bigger cut than most people thought we’d get and could send the oil price up to between $56 to $60 per barrel,” say Bob Minter, investment strategist at Aberdeen Asset Management. The agreement takes effect on January 1 and is set to expire after 6 months.

Gas prices typically fall in the winter months when people drive fewer miles. But that may not be true this year. “Something we have not seen very often is that gas prices have been rising during the month of December,” said Patrick DeHaan, senior petroleum analyst at GasBuddy.com. “I think we’ll continue to see prices picking up.” Gasoline prices averaged $2.21 per gallon nationwide as of December 12, according to GasBuddy. That was up 3.8 cents from November’s average and up 19.8 cents from a year ago.

Rising gas prices could send shivers through the wallets of Americans who have doubled down on large gas sucking trucks and SUV’s during the past two years. USA Today predicts the price of gasoline could rise to around $3.00 a gallon by the spring of 2017. If so, Americans will be paying almost 50% more for gas than they did during the same period this year.

“With this era of low gas prices, many Americans were trading in their vehicles, selling their vehicles, buying new vehicles that have been less fuel-efficient,” DeHaan said. “If gas prices do start to inch up, there’s a lot of Americans that bought a new vehicle in the last two years during this climate of low gas prices, so it may affect them more.”

The question now is whether the announced cuts will ever actually take place. Massive cheating is the rule rather than the exception among oil producing nations. The agreement could fall apart even before it expires June 30 if member nations continue to slit each others’ throats to increase their share of the world market.

Americans seem to think they have a God given right to cheap gasoline, regardless of any consequences that may flow from their gluttony. If gas prices spike, there will be a chorus of protests from the populace demanding the government “do something.” That would be the same government that many Americans say they despise and vilify for its meddling in the free market. Interesting how hypocrisy is something we can always see in others but seldom in ourselves.

Source: USA Today

OPEC To EVs: We Sneer In Your General Direction

To hear the people who run OPEC tell it, the world will continue to consume oil in prodigious quantities for at least the next 50 years, come Hell or rising sea levels. Basically, it thinks the people of the world are too stupid and too weak to stop burning fossil fuels. EVs? Forget about them. Never gonna happen, says OPEC in a new 470 page report.

“Without a technology breakthrough, battery electric vehicles are not expected to gain significant market share in the foreseeable future,” it said. “Electric cars cost too much. Their range is too short. The batteries are defective in hot or cold conditions.” Even though battery prices may fall 50% or more over the next 20 years, EVs will not appeal to mainstream  shoppers due to “consumer resistance,” the report says.

OPEC does acknowledge the climate accord reached earlier this month in Paris may signal trouble for the coal industry, but thinks oil production will continue on at about the same level far into the future. In fact, it salivates over the prospect of a some global crisis that will increase demand and drive prices higher again. Who knows? Maybe GM will revive the Hummer brand, so Americans can drive 10 mile per gallon pseudo-armored vehicles to work again.

The inevitability of price fluctuations is one of the leading factors driving a shift away from fossil fuels. The price of sunlight and wind never changes — both are free and will be forever. Two winters ago, Americans were paying $4.00 a gallon for heating oil. Today, the price is less than half that. The uncertainty of future prices is one of the factors driving the market for rooftop residential solar.

The world’s major automakers are pouring billions into making better EVs. China wants 90% of new cars to be electric soon. Geely Motors says it will hit that target just 5 years from now. Audi, Volkswagen, Mercedes and BMW are rushing plug-in hybrid and electric cars to market. Ford and GM are stepping up their investments in electric cars. The Japanese manufacturers are betting heavily on fuel cell technology.

The number of cars in the world is projected to increase rapidly in coming decades, but most of them will not run on gasoline. Where does OPEC think its projected growth in the oil market is going to come from? People may still doubt the science about rising sea levels and melting ice caps, but from Beijing to Paris, Milan to Rome, polluted air is telling residents that they are being slowly poisoned by the very air they breathe. People can’t see the oceans flooding Pago Pago, but they can feel the burning in their lungs as they gasp their way through the work day.

15 years ago, former Saudi oil minister, Sheikh Ahmed Zaki Yamani, said in an interview with the Telegraph that a moment of reckoning was coming for the oil industry. He specifically mentioned fuel cell technology as one of the principal factors that would alter the energy landscape. “Thirty years from now there will be a huge amount of oil — and no buyers,” he said. “Oil will be left in the ground. The Stone Age came to an end, [but] not because we had a lack of stones.”

Within OPEC, nobody is listening to Sheikh Yamani’s words today.