Consumers in Control of Their Gas Price Destinyby Tim Manni
Oil prices were relatively unchanged this morning despite OPEC’s announcement yesterday that they were trimming daily production by 500,000 barrels. Just as we had predicted, OPEC’s modest trim had no immediate effect on rising prices. Oil producing countries have fresh memories of what record-setting gas prices did to consumer demand. While it’s highly likely that OPEC will do its best to keep oil prices from reaching July levels, they need to keep oil prices from dipping too much lower in order to maintain profits.
It will be a chess match between consumers and oil-producing countries to keep the price of oil at a level where both consumers will spend and producers can turn a steady profit. Maintaining the US’s dependence on oil will delay the production of alternative fuels and vehicles — good news for OPEC.
That price still provides producers a nice profit margin—$25 a barrel more than a year ago—but also has the benefit of not further undermining global demand, which has dropped steeply in recent months.
Bryon King, an oil industry geologist and industry analyst and editor of Outstanding Investments newsletter, also expects prices to slip into the $90 range in the next couple of months.
“But we better enjoy it while we can,” he adds, because prices will rebound with the economy, especially as oil field depletion rates continue to outpace new supply coming on-line.
A strengthening dollar will continue to create a positive control on pricing, allowing the US to get the most bang for their buck when buying oil. As volatile as the oil industry is, consumers are in the driver’s seat in terms of controlling how much they are willing to pay for gasoline.