OPEC agreement leads to gas price increase here
By Kalea Hall
A month ago, Ohioans paid about 20 cents less at the pump than they are now.
On Nov. 20, gas in Youngs- town averaged about $1.99 and Tuesday it was $2.20, according to the website GasBuddy.com.
The reason for the increase: OPEC and non-OPEC members reached their first agreement since 2001 to reduce their oil output.
SDLqThere definitely is a lot of impact from the announcement,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.
The agreement between OPEC and non-OPEC members to cut their oil supply by 1.8 million barrels per day caused oil benchmarks to jump, which then led to an increase in the price at the pump. West Texas Intermediate, WTI, crude – the U.S. benchmark – futures for January were at $52.57 on Tuesday, according to Bloomberg Markets. On Dec. 21, 2015, the WTI price was at $34.74. Brent – the overseas benchmark – futures for February 2017 were listed at $55.79 on Tuesday. On Dec. 21, 2015, the Brent price was at $36.35.
“Overnight [the announcement] had an immediate price impact,” DeHaan said. “It took a little longer to start playing out at the pumps.”
Nationally, the price of gas is up from $2.14 reported Nov. 20 to $2.25 on Tuesday.
“It looks like there are a 22 states that are up double digits since last month,” DeHaan said. “I think in areas like Ohio, the bulk of oil prices have played out at the pump. Retail prices in Ohio have caught up, not to say that prices can’t go up again.”
DeHaan explained that in Ohio and other Great Lakes states, prices are more volatile than elsewhere because of more competitive markets. These states have the largest hikes and decreases in gas prices.
“There are some markets that are more engaged in competition,” he said.
There has also been a spike in the U.S. rig count. As of Dec. 16, the count was at 637, up 13 since the last count on Dec. 9, according to Baker Hughes, an oilfield service company.
“It does indicate that there’s some glacial movement,” said George Mokrzan, Huntington Bank director of economics. “I think the problem that with those agreements there’s tremendous incentive to still pump a lot and take advantage of a higher price.”
Although the price has increased, it’s still far behind the high price of $100 or more per barrel that it was in June 2014. Before the price of oil plummeted, Youngstown gas prices in June 2014 were between $3.75 and $3.80 per gallon.
“It’s still low relative to the prices over the last decade,” Mokrzan said.
Mokrzan emphasized the importance of the need for demand to impact prices.
“You get China growing a little faster and the U.S. and the trading partners doing better that you can raise demand for energy,” Mokrzan said. “It’s a supply and demand story.”
Last week, Goldman Sachs analysts upped their second quarter 2017 WTI forecast to $57.50 a barrel from $55 a barrel.
After the first quarter of 2017, “we expect that the global market will remain balanced, with Brent prices between $55 a barrel and $60 a barrel, on higher production from low-cost producers, a greater shale supply response and the continued ramp up in legacy projects,” the analysts said.