With gasoline prices surging, consumers are voicing frustration with gasoline prices, especially as the United States has just eclipsed a milestone, producing 10 million barrels per day of oil, the highest level since 1970 and very close to an all-time record.
So what’s going on? GasBuddy Head of Petroleum Analysis Patrick DeHaan weighs in:
Question: Why are oil prices so high and what’s behind the recent rise?
Answer: “A combination of factors. First, OPEC’s production cuts have removed over five hundred million barrels (1.8 million per day) of supply since they were enacted to start 2017. Second, U.S. oil exports are at record levels, further draining supply from the U.S. Remember that exports were legalized in Obama’s last year in office. Third, U.S. oil inventories are down 77 million barrels vs. one year ago- a tremendous drop. All three of these are pushing oil prices higher, plus high demand in the United States for gasoline. So far in 2018, the Energy Information Administration says gasoline supplied to the market is up over 7%.”
Question: The U.S. just surpassed 10 million barrels per day of oil production. Why isn’t this keeping prices down?
Answer: “U.S. production is nearing record levels, but the rise in U.S. production can’t come close to offsetting OPEC’s production cuts, which have seen over 100% compliance. Also, unexpected is the economic collapse in Venezuela, which saw 2017 oil exports at their lowest level since 1989. Oil would most certainly be much higher without the “shale revolution” we’ve seen in the last decade. The U.S. went from producing 5-6 million barrels a decade ago to nearly 10 million today. However, we still import the remaining 10 million barrels per day that we consume. In addition, China saw imports of crude oil at record levels and are nearing the level of imports of the U.S. So overall while U.S. supply is up, global supply and inventories are down, and oil is a global commodity and prices are set not just based on what’s going on here in the U.S., but what’s going on globally.
Question: What direction will gas prices be going in the weeks and months ahead?
Answer: “Up. We’re seeing more issues weigh on oil prices (such as Venezuela’s low oil production and high Chinese demand) that have been creating somewhat of a storm at the pump, and gas prices nationally may rise to an average that’s 10-25c/gal short of $3/gal by our peak in spring, with more areas hitting $3 than we previously anticipated just a month ago. In addition, once refinery maintenance season begins en masse by mid-March, gasoline production ability will be diminished, sending prices higher. To make things worse yet, the transition to summer gasoline will constrain supply further and eventually send prices up at a faster pace than what we’re currently seeing.”