Last weekend’s surprise announcement from OPEC that it would cut production by over a million barrels per day starting in a month has sent shockwaves through the oil market. Crude prices surged above $80 a barrel in response, and the national average for a gallon of regular gasoline rose seven cents in the past week to reach $3.55.
AAA spokesperson Andrew Gross commented, “The oil market has had a few days to digest the OPEC news and speculate about the reason. This has led to the price of oil stabilizing for now.” However, he warned that “the cost of oil accounts for more than 50% of what we pay at the pump, so drivers may not catch a break at the pump any time soon.”
Data from the Energy Information Administration (EIA) reveals a slight increase in gas demand from 9.15 to 9.3 million b/d last week, while total domestic gasoline stocks dropped significantly by 4.1 million barrels to 222.6 million barrels. This tightened supply amid growing demand has driven pump prices higher, with further increases likely if demand continues to rise.
Today’s national average of $3.55 is 15 cents more than a month ago and 61 cents less than a year ago. The top 10 states experiencing the largest price increases since last Thursday are Ohio, Delaware, Maryland, Georgia, Oklahoma, Illinois, South Carolina, Wisconsin, Minnesota, and Washington, D.C. The most expensive markets in the nation are California, Hawaii, Washington, Arizona, Nevada, Oregon, Illinois, Alaska, Utah, and Washington, D.C.
Oil prices dipped slightly on Wednesday, settling at $80.61, amid concerns that a recession could negatively impact oil demand and prices this year. The market’s earlier spike followed OPEC+’s decision to cut production by 1.6 million barrels starting next month for the remainder of 2023. The EIA also reported a decrease of 3.7 million barrels in total domestic commercial crude inventories, now standing at 470 million barrels.
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