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home : news : news November 23, 2017

10/29/2017 9:11:00 PM
Gas Prices Likely Going Up
Lincoln Herald Staff Photo
Lincoln Herald Staff Photo

Wayne Howard
Staff Writer

Fill 'er up! It's a good idea to keep your tank nearly full because there's a definite likelihood that gas prices are going up.

Oil prices rose strongly last week, finally breaking two-year-highs on Friday, eclipsing $60 a barrel. Lincoln Herald readers may recall that $60 is the price I had predicted would be the place where prices would likely stabilize--but the truth is I had expected it months ago.

In recent months, when the price got close to $60 a barrel, the market took a nosedive and lost the ground it had gained. Part of that was because of huge stockpiles of crude available for processing and a significant amount of already processed petroleum awaiting distribution. Both have declined somewhat, but there's still a glut at this point.

Carolina Trust Bank

One reason the price may stabilize is that OPEC is looking at extending production limits through next year. The Wall Street Journal reported last week that Saudi Arabia and Russia are leaning towards agreeing to extend production limits, a move that could be finalized at the upcoming meeting in Vienna on November 30th. If those two agree, it would be likely that the rest would fall in line.

There are, of course, no guarantees. The Russian energy minister said last week if the agreement collapses, Russia will boost output by 100,000 barrels per day next year. The $60 per barrel price also makes fracking more profitable for US producers, many of whom have already figured out how to cut expenses (mostly by reducing the pay they offer for workers), a move that has lowered the profitable mark for fracked petroleum from better than $60 a barrel to around $40 a barrel. The higher price of crude means, of course, bigger profits--and a reason to increase production.

How much will gas go up? There are other factors besides the price of crude involved. The hurricane in Texas and Louisiana drove prices up when some refineries were shut down and others had difficulty getting their product piped to the eastern US. You may recall that prior to Hurricane Harvey, gas prices in our area were just a little over $2 a gallon. They've settled back (as we assured you they would) but just this past week did they get close to the same as they were before Harvey.

I would expect an increase of at least 5-10 cents per gallon before the week is over, and it's possible that prices could go up by 25 cents a gallon over the next month. The good news is that if the crude price stabilizes at $60 a barrel, we won't be seeing $4 or even $3 a gallon gas any time soon.

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