geoff: Major oil-producing
countries including Saudi Arabia
and Russia have announced they
are cutting oil production by 2
million barrels per day.
That means Americans will soon
be feeling the effects of that
decision when they fill up their
gas tanks.
But as Ali rogin reports, the
impact will depend at least in
part on where in the country you
live.
Ali: Gas prices are likely to
change as a result of the
decision from OPEC plus, that is
the group of 23 oil exporting
countries that meet regularly to
decide how much crude oil will
be produced.
There are several other factors
contributing to already high
prices in certain parts of the
country.
Here to break it down is Patrick
de Haan, head of petroleum
analysis at gas buddy.
Thank you for joining us.
In general we've seen gas prices
take down through a lot of the
country, there are some major
exceptions to that, especially
with places like California and
the great Lakes region.
Those are major population
centers.
Can we first talk about why
prices are taking backup in that
part of the country?
Patrick: The past few weeks, an
onslaught of refinery issues in
on the west coast and great
Lakes has pushed gas prices up
tremendously in areas of
California.
Some have risen one dollar to
$1.50, because of shutdowns that
have brought supply on the west
coast to the lowest in 10 years.
The great Lakes, they are up
$.50 to one dollar.
Ali: We know sometimes
refineries have to go off-line
for scheduled maintenance but
what is happening in these
cases?
Patrick: Of a right -- a variety
of both of those.
With summer behind us, several
refiners are going through
seasonal maintenance and that's
normally not a problem, but in
California and the great Lakes,
it is the unexpected issues that
can arise, akin to getting a
nail in your tire or a rock on
your windshield.
These can be minor issues but
put together a greatly limits
the ability for refineries to
produce gasoline.
It is planned maintenance, but
also unexpected outages, four in
California alone.
Ali: You add to that the OPEC
plus news.
How will that compound what
those parts of the country are
feeling in terms of gas prices?
Patrick: As a result of the OPEC
decision to cut oil production,
expect the national average
could rise $.10 to $.30 a
gallon.
What it will do is probably what
some don't expect, the refinery
issues have started to improve,
surprises in the rate likes and
the west coast will start to
drop but probably not as much
because of the OPEC decision.
Ali: What about the rest of the
country?
You mention prices are likely to
increase, so how are those
regions of the country going to
be affected?
Patrick: We are already seeing
some of these regions go up in
price and that's because oil
prices had expected this OPEC
decision.
Oil prices are almost $15 a
barrel higher than last week.
Prices are rising in the
rockies, the northeast and
southeast.
I expect the rise to be $.10 to
$.30 a gallon.
Ali: How much do expect prices
to continue to rise given what
you just said, that some of
these increases have already
been baked into what we are
seeing?
Patrick: Exactly, some of these
areas have gone up maybe five
cents or $.10 a gallon.
For the areas that haven't seen
anything at all, they will bear
the brunt of the bigger
increases, as much as $.10 to
$.30, starting at any moment if
not already, and that will last
for one or two weeks.
I would expect a totality, the
average impact to be $.10 to
$.30 a gallon coast-to-coast as
a result of OPEC cutting
production.
Ali: Those are some of the
disparate activities we don't
necessarily see around this time
every year, what we don't see is
fuel demand tends to dip after
the summer travel season.
Will that impact gas prices in
the short term at all?
Patrick: It is likely softening
the blow of the impact from
OPEC's decision to cut oil
production.
As you mentioned, gasoline
demand tends to go down as
Americans a stay closer to home
and cooler weather keeps them
inside.
If OPEC had decided this in the
midst of the summer driving
season, the impact might be
double what it otherwise would
be.
A fall in demand will generally
help limit the impact.
By the end of the year we can
still see prices lower than
today.
Ali: Lastly, is there anything
the Biden administration can do
to bring down prices in the near
term?
Patrick: I think the bided
administration has talked a lot
about how he doesn't want to
rely on the fossil fuel sector
and move away from it, but it is
also undermining oil companies's
desire to invest, knowing the
writing might be on the wall.
They have gone to other places
to ask for additional oil
output.
I think the president can
provide clarity.
Ali: Patrick de Haan, thank you
so much for your time.
Patrick: My pleasure.