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

Gas reaches lowest prices in over a decade

Summer travelers have reason to be happy today. The American Automobile Association (AAA) announced that gas prices are lower than they've ever been for July in the last 12 years. According to AAA, the national average gas price right now is $2.21 per gallon of regular unleaded. Not only that, but 25 percent of the country's gas stations are offering gas under $2. The lowest gas prices in the country are in South Carolina at just $1.88. California still holds the title of highest prices at $2.85, just edging out Hawaii at $2.82.

AAA credits the low prices at the pump to a large gasoline surplus in the US and relatively low prices for a barrel of oil. Currently, the US has a 13 percent larger supply of gasoline than it did last year, and that surplus is the largest it has ever been for the US in July. Oil prices are also hovering at about $45 a barrel.

This isn't the only good news for drivers this summer. AAA expects gas prices to remain low throughout the summer, barring some unforeseen event such as a hurricane, distribution, or refinery issue – or possibly overseas tensions. While the low gas prices are a boon for consumers, those concerned about fossil fuel usage and greenhouse gases may be worried about people driving more and a possible return to high truck and SUV sales.

Low Gas Prices Hinder Hybrid Sales, But Plug-Ins Still Selling

The national average for a gallon of regular gas has fallen to just $2.88 a gallon. That’s helped truck and SUV sales grow, but has put a hurting on hybrid sales. Sales of the Toyota Prius are hurting in particular, and hybrids share of the market seems stalled at 3%. Plug-in car sales are a different matter though.

As the LA Times notes, even inside of California where the Prius has been a best-seller for a couple of years, hybrid sales are slipping. One of the most obvious culprits are conventional gas-powered cars, many of which have narrowed the fuel economy gap that the Prius once enjoyed. Many conventional mid-size sedans can now get 30+ MPG on the highway, while hybrid cars still carry a $3,000 or $4,000 premium over comparable gas models.

Despite there now being more than 40 various hybrid vehicle offerings from just about every major carmaker, hybrid car market share is holding steady at 3% of the total market. Toyota hopes its next-gen 60 MPG Prius will turn the tides in favor of hybrids once more, but in the face of dropping gas prices, nothing is garaunteed.

But another factor not discussed by the LA Times are the increasing numbers of plug-in models available to consumers that may attract people who may have otherwise purchased a conventional hybrid. While plug-in car sales were down in Ocotober, year-to-date plug-in car sales are up 28% over the same time in 2013, with sales surpassing 75,000 units so far this year. While that’s still a fraction of total U.S. sales (and less than the total number of Prius sold so far in 2014 alone), it represents an increasing trend in America of plugging in rather than gassing up. Nissan LEAF sales alone

As Martha might say, “It’s a good thing.”