Gasoline Prices Expected To Climb for Summer 2018
With uncertain middle eastern oil production, and predictions from the US Energy Information Administration, it’s high time to predict high prices at the summer pumps.
Right now, the price of a barrel of crude oil is around $70, but political and military trouble in the oil producing parts of the world including Iran and Venezuela are expected to drive the cost-per-gallon to over $3.00 in some states.
Without getting into the politics, the price of oil is determined by the type of oil pumped from the ground and the refineries that are available to turn it into something we can use.
Who Produces The Oil?
One of the most difficult questions to answer is where, exactly, the oil at your pump is coming from. It would be a dream if pumps gave you a choice, the way that a high class coffee bar works: This pump dispenses Saudi oil, this pump dispenses Texan oil, this pump dispenses Canadian oil, this pump dispenses Venezuelan oil.
It might cost a few bucks more, but there are enough people out there willing to pay extra for the western oil that it would make an impact on the world market.
So, you as the consumer aren’t given that information. If you know someone in the know, you might be able to hear where the barrels of oil developed at local refineries are coming in from, but there’s still no guarantee. So instead, we can look at world oil production overall.
Oil, like any product, works in a supply and demand environment. During the summer months, consumer demand for oil ticks up as more people hit the road to go driving. If there’s no change in production, it makes the oil refined for cars more scarce and therefore more expensive. With unrest in the middle eastern countries that produce lots of oil, there will be a further scarcity that will drive up costs.
Right now, there are the countries that produce the most oil, with Russia producing over 10,500,000 barrels per day and Mexico producing over 2,180,000 barrels per day.
- Saudi Arabia
- United States
- The United Arab Emirates
This is also a list of the countries that seem to make up quite a bit of the news cycle. Socialist Venezuela has seized their oil production companies and the regime may be on its last legs. Citizens are eating zoo animals and rats in an effort to stay alive.
In the last few days, much of the focus has been put on to Iran, who has taken to using Syria as a launch pad to chuck rockets at the Israelis. Iran produces over 3,900,000 barrels per day, more than the Canadians who produce 3,600,000 barrels.
Overall, the world produces 80,622,000 barrels every day but it’s still not enough.
Different Types Of Oil
There are more factors that, once thrown in, can confuse the final cost for consumers. Not all oil is created equally, and not all refineries are able to refine everything pumped from the ground. Light sweet crude oil is what is pumped up from countries including Saudi Arabia and Russia, and it has low amounts of naturally occurring sulfur. This is the type of oil that is disproportionately refined into kerosene, gasoline and diesel.
In North America, oil pulled from the ground is anywhere from sour crude to sweet crude to light sweet crude, all of which requires different refineries.
So, if one type of oil — say, the light sweet crude produced from the Middle East and pumped into your vehicle — is not being produced, then the refineries that are less suited to producing gasoline and diesel are unable to make up for it.
AAA of Tennessee Blames Mid East For Next Gasoline Spike
According to Megan Osborne with AAA, there will likely be a “knee-jerk” reaction to the current conflicts in the Middle East that might turn into higher gas prices, “the highest prices that we’ve seen since 2014.”
In September of 2014, that meant $3.35 per gallon in the state of Tennessee. While AAA says it might not be that bad, they’re saying that over $3.00 a gallon isn’t out of the question.
U.S. Energy Information Administration
In a release last night, the EIA has announced that American crude oil and gasoline stocks have fell more than they expected in the last week due largely to a drop in imports of crude oil.
The number of crude barrels on hand is 2,200,000 barrels short of target, compared to a predicted decrease of 719,000 barrels.
As well, the utilization of refineries has dropped.
Further, the stock of distillates, a classification that including diesel and heating oils, is down by 3.8 million barrels compared to an expected drop of 1.4 million barrels.
Gasoline futures are also creeping up to $2.167 per gallon and are expected to continue to rise.
Sources: WSMV Nashville, Reuters, Wikipedia