Don’t count on a gas price repeat
The recipe that led to a boom in scooter sales in 2008 likely won’t be repeated this spring and summer, officials familiar with the oil industry say.
In fact, prices at the pump are not likely to average more than $2 for the nation throughout 2009, according to a U.S. government outlook. That average, of course, could swing somewhat higher in the summer and in particular regions, notes Neil Gamson, an economist for the federal government’s Energy Information Administration.
Last year, prices of oil produced outside the United States escalated to more than $145 a barrel thanks in part to huge worldwide demand, particularly from emerging economies in Asia. Oil production outside of the United States accounts for more than 60 percent of the oil consumed in the nation so prices at the pump soared.
Barring some catastrophic event occurring in an oil-exporting country, is this scenario likely to happen again this summer?
“We don’t think so,” Gamson said, adding. “The global recession is overwhelming any other factors.”
In fact, the global oil market has remained relatively stable since drastically falling in the second half of last year, an Energy Information Administration report stated. The report said this situation is expected to continue through 2009 or until an economic recovery leads to more demand for oil.
Even early news reports suggesting OPEC could further cut production — it did in the fourth quarter of 2008 by more than a million barrels per day — in mid-March isn’t likely to have a significant impact on gas prices. That’s partially because worldwide demand is expected to reduce by 1.4 million barrels per day this year, according to the Energy Information Administration report. Plus, as Gamson pointed out, there are competitive reasons why OPEC has to scrutinize any further cutbacks.
“If they keep cutting, they will be losing market share because the other countries won’t cut,” he said. “There are a lot of non-OPEC exporters out there (like Russia, Canada and Mexico) that produce as much as they want.”
As it turned out, OPEC did not cut back their production, the group announced at its March 15 meeting.
“OPEC countries can do very little to push prices up,” former Saudi Arabian Oil Minister Sheikh Ahmad Zaki Yamani told Bloomberg.com.
Even as gas prices remain at much-reduced levels than last year — more than a dollar less per gallon in many cases — the effect of such fluctuations on consumers still linger, according to a consumer research survey done by BIGresearch. The online survey of more than 8,000 U.S. consumers finds as a result of fluctuating gas prices, consumers are more likely this year to shop closer to home than a year ago. They also will be driving less and using coupons more, the survey found.
— Neil Pascale