Under the existing model gas prices are oil-indexed. Consequently, following the fall in oil prices in 2008/2009 gas prices also fell. I therefore expect gas prices will be decreased in the next gas season...
If market oriented prices are there, then one can expect decrease in gas as well as diesel and petrol prices.
On the other hand one may question will the lower gas prices have negative impact on security of supply. The lower oil price may influence that price of Russian gas will be decreased thus influncing that USA gas exported to Europe will not be competitive.
Yes, I believe gas prices follow the trend of oil prices. Here, we have low prices for petrol and cooking gas, because of subsidies.
'Malaysia's petrol and diesel prices is the eighth lowest in the world. "Out of 227 countries in the world, Malaysia's petrol and diesel price to its motorists is the eighth lowest," said Deputy Finance Minister Datuk Ahmad Maslan. He said the cheaper price was due to the significant subsidy given by the government for petrol and diesel as well as cooking gas. Ahmad said the government had given a subsidy of 90.4 sen for each litre of diesel and 90 sen for each litre of RON95 petrol. He said the people had only to pay RM1.80 per litre of diesel instead of RM2.74, and RM1.80 per litre of RON95 petrol. "Without the subsidy of 90 sen per litre, the price for RON 95 petrol should be RM2.80 per litre," he said.'
http://www.thestar.com.my/News/Nation/2013/07/17/Msia-fuel-8th-cheapest/
Lower oil prices would lead to a healthier market and higher mass production levels!
If market oriented prices are there, then one can expect decrease in gas as well as diesel and petrol prices.
Yes, gas price should also decrease, because the decrease in oil price.
Gas prices are going down because oil prices are going down! It is a supply and demand balance. On the demand side - global economic activity is weak, and on the supply side - no one's paying attention to demand.
I wpuld honestly say: yes, one can expect the fall of oil prices. However, it is unlijkely: a) that such a fall may happen as sharply as ione would expect; and b) that this may happen sometime soon in the future,.
By this I mena: let's please not think any more in mechanical terms, i.e. cause-and-reaction as mechanical pocesses. The "Free market" does not work in such a way. There are interests, policies, overheads, and so on.
Petroleum & natural gas go hand in hand. In many places, the petroleum well is often (but not always) close to the N.G. well. Both crude oil & N.G. are utilized mainly as sources of energy. The market sells them as energy-rich materials in the first place, so when there is fall in the price of one of them the other will follow suit. You will find in some houses, 2 stoves: one runs on kerosene & one runs on methane "main component of N.G." ; the consumer will run the stove that depends on the cheaper neglecting the other. There are cars which are run on diesel or gas by a simple modification & the choice is obvious, It is illogical for one material to become cheaper while the other stays fixed in price or goes up.
When you fill the tank, have you noticed that it leaves your wallet a little less empty? Gas prices have been falling for months, and they should continue their decline throughout 2015.
The national average is expected to drop 23 percent in 2015 to $2.60 per gallon, according to the federal Energy Information Administration. If that projection holds, it would mean an average savings of 77 cents per gallon throughout the year.
That's a lot more than pocket change. According to a Bankrate analysis of government petroleum statistics, each American driver stands to save about $452 on gasoline in 2015.
Domestic oil production has increased every year since 2008, which has contributed to a growing world supply. Meanwhile, American refineries are buying fewer barrels of more expensive foreign crudes.
One of the primary reasons your gas prices rise or fall is the fluctuation in the price of crude oil. U.S. refineries buy several million barrels of oil every day to supply the world's biggest economy, so even small price changes make a big difference.
When crude oil prices go up or down, gas prices tend to follow. And right now, oil prices are on the decline.
Oil prices have been falling for several reasons, including the increased U.S. crude production and an outlook for weaker growth in global oil demand. Meanwhile, the Organization of the Petroleum Exporting Countries, or OPEC, decided toward the end of 2014 not to manipulate prices by restricting oil production.
Overall, government energy forecasters expect crude prices to be significantly lower in 2015. The Energy Information Administration says the U.S. benchmark price could drop to $62.75 per barrel in 2015 -- a 33 percent discount from 2014. That means refineries would pay less for crude oil, and at least some of that savings should be passed on to drivers in the form of cheaper gasoline.
As long as the retroactive netback price formula is based on a price of oil (it regards lots of LTAs), it should decrease. Another imprtant variable is the rate of exchange of USD. In general, regadless the type of contract, I think that we can expect lower gas prices in the nearest future.
I don't think so. For example Greece has a very constrained contract with specific volumes to buy at specific prices. I cannot see how the gas price could decrease...at least for Greece.
As a motorist I have felt continuous decreases in the past three weeks.
Dear Darko,
One would expect for the price to drop just like one expects the price to rise during the summer driving season.
I however think there is one factor which can at any time be pulled out and played by the the oil companies that being a "sudden" refinery shut down for maintenance. With as many "analysis have stated over the years it is the capacity of refineries that is the plug point in a constant flow from ground to gas tank.
I would think the answer is no due to most comments posted expressing the 3 week to a month continued dropping of oil prices.
Douglas
Oil prices are not currently high enough to stimulate firms to drill new wells which was main goal of biggest producers. Markets may be expecting oil prices will remain lower for longer and following that gas prices.
Experts now predict oil could go as low as $40 or even $30 a barrel. While that's great for U.S. consumers, who are enjoying gas prices of $2 or less not seen since the worst of the Great Recession, there comes a point when sustained low prices begin to really hurt energy company stocks and jobs in the U.S. and other countries around the world.
http://money.cnn.com/2015/01/05/investing/stocks-market-fall-oil/
Italian Regulatory Authority for Electricity Gas and Water is the independent body which regulates, controls and monitors the electricity and gas markets in Italy.
It has been established by the law November 14th 1995, n.481 with the purpose to protect the interests of users and consun mers, promote competition and ensure efficient, cost-effective and profitable nationwide services with satisfactory quality levels.
The Authority mission includes defining and maintaining a reliable and transparent tariff system, reconciling the economic goals of operators with general social objectives, and promoting environmental protection and the efficient use of energy. It provides an advisory and reporting service to the government and parliament, and formulates observations and recommendations concerning issues in the regulated sectors of electricity and gas.
Sure, if gas prices are indexed to oil market prices, they should follow the decrease. If gas prices are energy market dependent out of oil, they should follow the market energy demand from this form of energy.
Dear Fairouz,
you are right with your statement, in principle. Germany is a wonderful contra example. They delay and delay and delay the adaption. It brings a lot of money.
Is Oil/Gas price predictable/expect-able? If yes, why didn't the experts predict/expect the recent dramatic fall in Oil price?
Looking from the Croatian perspective, changes in the market of petroleum products is currently no impact on the price of gas on the Croatian market. The price of gas for households in Croatia is regulated by the state in charge of the formation of prices for the domestic market through Tariff policy based on the cost principle.
Thank you @Hanno for your appreciation. In principle prices should be fixed according to markets' offers and demands scheduling, However the global energy market is managed by extra parameters to the offers and demands fluctuations. Germany seems to favorite another energy option; the green energy. It is as well a good option and may be the best one for the future as fossil energies are perishable and nonrenewable energies
You are right dear Fairouz,
but the greening needs time and a lot of people here in Germany still use fossil energies, so we are fixed to the prices and hope they act correctly.
Average price of Russian gas set to plummet by up to 35% this year
The price of Russian gas supplied to most of the European countries and Turkey could plummet by up to 35% in 2015, tracking lower oil prices, according to Russian newspaper Vedomosti.
http://www.energymarketprice.com/
If other factors including geopolitics remain the same, we can expect decrease in gas prices following the fall of oil prices on global market. Oil and gas are related and complementary products.
Revisiting the “Golden Age of Gas”
Laszlo Varro, Head of Gas Coal and Electricity Markets, International Energy Agency (IEA)
“The good news is that shale gas production in the US is actually running 10 years ahead of schedule: it is as much now as we predicted for the 2020s, so the US industry is beyond the golden age – perhaps in the platinum or diamond age of gas, defying gravity.”
http://www.naturalgaseurope.com/revisiting-the-golden-age-of-gas-pending-approval-23346
Marcelino Oreja: We are living in the golden age of gas
http://www.europeanceo.com/business-and-management/marcelino-oreja-we-are-living-in-the-golden-age-of-gas/
I guess that there are political factors that control prices of oil and gas. So the gas price is possible decrease as as oil price.
Dear Colleagues,
Good Dy,
Here in the 1st link a report from CNBC with a title "6 Reasons Gas Prices Could Fall Below $2 a Gallon", it says : The price of gas is expected to fall below $2 a gallon by the time the New Year rolls around. Gas hasn't been below the $2 mark since 2009, when the U.S. was in the depths of the recession.
please, see the following websites for detail:
http://www.cnbc.com/2015/08/11/6-reasons-gas-prices-could-fall-below-2-a-gallon.html
http://www.gaspricesexplained.com/#/?section=gasoline-diesel-and-crude-oil-prices
http://www.timesfreepress.com/news/business/aroundregion/story/2015/jul/21/falling-oil-prices-could-cut-gprices-below-2/315640/
Because of the fall in oil prices all the cheaper Russian gas, since the price of long-term contracts Gazprom is associated with the formation of oil prices.
How Low Can Oil Go? Goldman Says $20 a Barrel Is a Possibility
http://www.bloomberg.com/news/articles/2015-09-11/-20-oil-possible-for-goldman-as-forecasts-cut-on-growing-glut
Yes!
We expect decreases in gas prices following the fall of oil prices on global market, but not at the rate at which global prices fall.
This is a real discrepancy!
Gas prices outpace cheap oil, but could fall soon
http://www.usatoday.com/story/money/2015/08/17/oil-prices-reach-new-low/31873975/
Nord Stream 2 Increases Financial Risks for Gazprom, Fitch Says
http://www.naturalgaseurope.com/nord-stream-2-increases-financial-risks-for-gazprom-fitch-says-25510
"Gas prices will fall further 15%
Fitch has forecasted that OAO Gazprom's natural gas prices will fall another 15% from current levels. Fitch also expected that Gazprom's European gas sales volumes will grow steady. Gazprom's European gas sales fell 7% yoy in 1H15 to 80bcm, while its average European gas prices declined by 26%, hitting multi-year lows.
Gazprom said it has raised its forecast for natural gas exports to Europe and Turkey to 158 Bcm in 2015 as daily nominations by consumers exceed last year's, with the average price of Gazprom's gas estimated at EUR 195.9/1,000 cu m ($221.7/cu m) for the coming winter.In June, Gazprom CEO Alexander Medvedev estimated the average price for European consumers at $240-$242/1,000 cu m for the year."
Nord Stream II: Gazprom Promotes a New Pipeline
"... If Gazprom wants to leave natural gas at the European border, the company needs relevant pipelines inside Europe's borders to move the natural gas to market. This is where the political disputes between Russia and Europe have most noticeably spilled over into the energy sector. To justify the construction of Nord Stream II, Gazprom must first navigate the internal pipeline politics that limit its use of the Nord Stream I pipeline. Gazprom's access to the combined 55 bcm of capacity in the Northern European Pipeline (NEL) and Ostsee-Pipeline-Anbindungsleitung (OPAL), which connect Nord Stream to West Germany and the Czech Republic, respectively, is limited by Europe's Third Energy Package third-party access requirements..."
http://www.naturalgaseurope.com/nord-stream-ii-gazprom-promotes-a-new-pipeline-25587
I don't blame or complain about things like the economy, the government, taxes, employees, gas prices, or any of the external things that I don't have control over. The only thing I have control over is my response to these things.
--- Jack Canfield
Oil-indexed gas prices have been revised down due to a combination of factors, chiefly the aftermath of the 2008 financial crisis, the deregulation of European electricity prices and the arrival of shale gas.Europe's chances for lower prices of Russia's natural gas are high in the growing competition, and also due to growing supplies of liquefied natural gas.
Dear Colleagues,
Good Day,
"Who benefits from the price drop?
Any motorist can tell you that gasoline prices have dropped more than a dollar a gallon. Diesel, heating oil and natural gas prices have also fallen sharply. Households are likely to spend $750 less on gas this year because of the oil prices, the United States Energy Information Administration said in January. Europeans and consumers around the world will enjoy similar benefits.
The latest drop in energy prices — regular gas nationally now averages around $2.30 a gallon, compared with $3.45 a year ago — is also disproportionately helping lower-income groups, because fuel costs eat up a larger share of their more limited earnings.
Gasoline prices are inching down as refineries do maintenance to switch to more inexpensive winter gasoline blends.
Who loses?
For starters, oil-producing countries and states. Venezuela, Iran, Nigeria, Ecuador, Brazil and Russia are just a few petrostates that will suffer economic and perhaps even political turbulence. Persian Gulf states are likely to invest less money around the world, and they may cut aid to countries like Egypt.
In the United States, Alaska, North Dakota, Texas, Oklahoma and Louisiana will face economic challenges.
Chevron and Royal Dutch Shell recently announced cuts to their payrolls to save cash, and they are in far better shape than many smaller independent oil and gas producers that are slashing dividends and selling assets as they report net losses.
Some smaller oil companies that are heavily in debt have gone out of business, pressuring some banks that lend to them."......
please, see the following links for details:
http://www.nytimes.com/interactive/2015/business/energy-environment/oil-prices.html?_r=0
http://www.bbc.com/news/business-29643612
http://www.timesfreepress.com/news/business/aroundregion/story/2015/jul/21/falling-oil-prices-could-cut-gprices-below-2/315640/
The gas for the European market in 2016 should go up by 14%, to $ 0.199 / m3 .Estimate the cost of gas for the European market in 2016 increased by 14%, to $ 0.199 / m3. The previous forecast was $ 0.174 / m3. It is also increased by 4.6% and the forecast cost of gas for Europe in 2015, at $ 0.25 / m3 instead of the previously forecasted price of $ 0.239 / m3. At the end of the first eight months of 2015. The average price of Russian gas to Europe amounted to $ 0.238 / m3, and the plan is that in 2015 the European market to be supplied 158 billion. m3 of gas,
Russian portal 'Oil and Gas Eurasia.
Oil investment set to decline further in 2016 -IEA's Fatih Birol
http://uk.reuters.com/article/2015/10/26/iea-oil-investment-idUKL3N12Q1A920151026
Oct 26 Oil investment in 2016 is likely to decline further after sliding this year by more than a fifth, Fatih Birol, the executive director of the International Energy Agency (IEA), said on Monday. "If it comes true, this will be the first time in two decades we will see oil investments declining for two consecutive years and may be an indication for future oil markets," he said at the Singapore International Energy Week.
Low prices should give no cause for complacency on energy security, IEA says
http://www.iea.org/newsroomandevents/pressreleases/2015/november/low-prices-should-give-no-cause-for-complacency-on-energy-security-iea-says.html
"An extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short, says the International Energy Agency (IEA) in the 2015 edition of its flagship World Energy Outlook publication (WEO-2015)..."
Average Export Price of Russian Gas Dropped 27% in 9 Months
"From January to September 2015, the average export price of Russian gas totalled $238.2 per 1000 cubic meters, according to statistical information of the Russian Federal Customs Service.During the same period last year average export price of Russian gas was $326.5 per 1,000 cubic meters. Thus, price dropped by almost 27%. Over a period of nine months, income from gas export decreased by $12.8 billion to $31.331 billion.Also over the same period, the volume of Russian gas export decreased by 2.9% and totalled 131.5 billion cubic meters.During this export period, Russian gas decreased by 2.9% against the same period last year and totalled 131.5 billion cubic meters.Export to Far Abroad (Europe) increased by 5.7% up to 104 billion cubic meters, while export to Near Abroad totalled 27.5 billion cubic meters, dropped by 25.9%."
http://www.naturalgaseurope.com/average-export-price-of-russian-gas-dropped-by-27-in-9-months-26301
Gas prices to stay low for the rest of the decade, Government forecasts
"Low gas prices are here to stay for the rest of this decade, new official forecasts suggest, raising the prospect of lower fuel bills for consumers ... Experts said the fall in gas prices has been driven by a combination of the plunge in oil prices, increased global supplies of liquefied natural gas (LNG), and mild winters in Europe...
http://www.telegraph.co.uk/finance/newsbysector/energy/12005819/Gas-prices-to-stay-low-for-the-rest-of-the-decade-Government-forecasts.html
Why low oil prices are bad news
https://www.rt.com/business/325911-low-oil-prices-bad/
" ...Crude oil dropped below US$35 a barrel for the first time in six years Monday, but what most media outlets report as good news is disastrous for some nations and Mother Nature after years of price-based fuel efficiency takes a back seat.Leaders in oil-producing nations who depend on oil revenue to feed, house, and care for their poorest citizens are also struggling to maintain economic stability.In spite of falling prices per barrel, countries are still increasing production for fear of losing market share..."
Analyst: Gas Prices Will Keep Dropping--and Russia Will Suffer
http://www.naturalgaseurope.com/gas-price-to-go-down-after-oil-27257
Russian analyst Andrei Shipilov
"The market is getting saturated," he concluded. "Prices will keep going down for a long time. Considering that construction of LNG terminals is very active in Europe now and the first terminal has been already launched in Poland, the prospects for Russia are not very promising."
Oil Prices and Global Growth!
"The recent decline in oil prices is on par with the supply-driven drop in 1985-1986, when OPEC members (read: Saudi Arabia) decided to reverse supply cuts to regain market share. It is also comparable to the demand-driven collapse in 2008-2009, following the global financial crisis. To the extent that demand factors drive an oil-price drop, one would not expect a major positive impact; the oil price is more of an automatic stabilizer than an exogenous force driving the global economy. Supply shocks, on the other hand, ought to have a significant positive impact..."
http://www.cirsd.org/news/article/oil-prices-and-global-growth
Low energy prices ought to be a shot in the arm for the economy. Think again
http://www.economist.com/news/leaders/21688854-low-energy-prices-ought-be-shot-arm-economy-think-again-whos-afraid-cheap?fsrc=scn/fb/te/pe/ed/whosafraidofcheapoil
"... In the past 18 months the price has fallen by 75%, from $110 a barrel to below $27. Yet this time the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets, and could yet depress consumer confidence. Perhaps the benefits of such ultra-cheap oil still outweigh the costs, but markets have fallen so far so fast that even this is no longer clear..."
Dear @Darko, I find this two articles may give a good info about the issue.
Is Small-Scale LNG an Option for Distributed Generation?
"In large part because of swelling supplies of natural gas, and failing crude oil prices that have helped depress gas prices around the world, as well as because of its environmental advantage over fuel oil, liquefied natural gas (LNG) is garnering growing interest as a generation fuel.
While huge, multi-billion-dollar LNG import and export terminals have grabbed much of the attention, one option a number of companies are looking at is the use of small-scale LNG to meet small generation needs, such as island grids and distributed generation (DG). There is a substantial amount of small-scale LNG infrastructure in existence around the world, and a robust market for small-scale liquefaction, with plants available at capacities down to a few thousand gallons per day.
Whether the LNG comes from a terminal or is liquefied from existing supplies in a smaller plant, LNG offers the advantage of being able to supply remote gas-fired generation that is too far from gas pipelines to justify a connection.
So far, however, small scale LNG–based power generation remains a more possibility than a reality, but it’s one some people are working to make happen..."
http://www.powermag.com/is-small-scale-lng-an-option-for-distributed-generation/?hq_e=el&hq_m=3213814&hq_l=2&hq_v=3a14ef5cfd
The other article follows:
Challenges of Increasing Dependence on Gas-Fired Generation!
"Use of natural gas for power generation in the U.S. is skyrocketing. From 2005 to 2015, the share of energy produced from gas has increased over 80%, with gas now comprising about 35% of the fuel mix. This rapid escalation in dependence on gas presents challenges for generators, independent system operators (ISOs)/regional transmission organizations, and regulators.
Perhaps the most salient issue is how to maintain reliability and limit price spikes in areas like the Northeast on cold winter days. On such days, gas pipeline capacity is often constrained and gas utilities and power plants compete for limited supplies. Considerable efforts are being made to manage these challenges—increased coordination, pay-for-performance standards, and innovative pipeline funding reforms—but success on these initiatives requires navigating through stakeholder resistance, a maze of regulatory complexities, and other obstacles....
How these issues and proceedings are resolved will go a long way toward determining the effects that increased reliance on gas-fired generation will have on reliability, prices, and the operation of the markets. They may well determine how large a role gas will play for many years to come."
http://www.powermag.com/challenges-increasing-dependence-gas-fired-generation/?pagenum=1
Airlines have been accused of “profiteering” and “exploiting” passengers after failing to pass on the full savings in the price they pay for jet fuel to their customers. Latest figures show the price of jet fuel has fallen by 70 per cent in the past two years, yet the average cost of a transatlantic airline ticket has been cut by just two per cent over the same period. Some airlines are even continuing to impose a fuel surcharge on certain routes, a mechanism originally intended to be used when the price of fuel goes up unexpectedly.
http://www.telegraph.co.uk/news/aviation/12155815/Airlines-accused-of-profiteering-from-fall-in-price-of-fuel.html
How Will Low Oil Prices Affect Natural Gas?
"Media coverage of energy has focused heavily on oil prices, lately, for understandable reasons. Oil's dramatic plunge and subsequent volatility would be newsworthy, even if petroleum weren't still our leading source of energy, especially for transportation. In this context, the dog that hasn't barked is natural gas, although oil and gas are still linked by common drilling hardware and often produced from the same wells. With oil drilling being curtailed in response to low oil prices, should we be concerned about natural gas supplies in the months and years ahead?..."
https://www.linkedin.com/pulse/how-low-oil-prices-affect-natural-gas-geoffrey-styles?trkInfo=VSRPsearchId%3A577811291456072573536%2CVSRPtargetId%3A5996638789374656512%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_content_res_name
Craig Pirrong,
a professor of finance at the University of Houston, told the Wall Street Journal:
“The inelasticity of supply and demand mean that the price is very sensitive to random shocks that are themselves hard to predict.”
In my opinion, Gas price and oil price need to be interlinked. Movement of price need to be in line with oil prices. However, it looks like that revenue generated through pricing of these products provide resources for welfare of society and other development like infrastructure. Therefore developing a correlation in the prices of gas and oil may be difficult.
Look at the other diemension, vulnerability to oil dependency is not just on oil self-sufficiency but the shrewdness to alternate Power generation.
https://www.oxfordeconomics.com/publication/open/222575
Dear, I agree with your principle.
Let me share you the information that I got from (https://www.thebalance.com/how-crude-oil-prices-affect-gas-prices-3306230)
Crude oil prices make up 71 percent of the price of gasoline. The rest of what you pay at the pump depends on refinery and distribution costs, corporate profits, and federal taxes. These costs remain stable, so that the daily change in the price of gasoline accurately reflects oil price fluctuations. High oil prices are what make gas prices so high.
It takes about six weeks for oil price changes to work their way through the distribution system to the gas pump.
Oil prices are a little more volatile than gas prices. That means oil prices might rise higher, and fall further, than gas prices. But you can still use oil prices to predict tomorrow's gas prices today.
Examples of How Oil Prices Affected Gas Prices
Oil and gas prices have been especially volatile since the 2008 financial crisis. Here's a look at their peaks and valleys and causes of the price swings.
2008 - Oil skyrocketed to its all-time high of $143.68/barrel on July 8. That sent gas prices to $4.16/gallon. Before 2008, prices remained below $90 a barrel.
2009 - Gas prices fell first, dropping to $1.67/gallon on December 29. Oil fell to $39.41/barrel on February 18 as investors bolted from any investment except ultra-safe U.S. Treasurys.
2010 - Oil prices stayed within the range of $70 to $80/barrel until December 3, when they breached $90/barrel. Gas prices followed suit, staying below $3.00/gallon until December 6.
2011 - The price of oil didn't reach its spring peak of $126.64/barrel until May 2. Unusually, gas prices peaked at the same time, hitting $4.01/gallon. Gas prices stayed above $3.50/gallon all summer due to fears about refinery closures from the Mississippi River floods.
2012 - Iran threatened to close the Strait of Hormuz, through which flows 20 percent of the world's oil.
Oil prices rose to their peak of $128.14/barrel on March 13. Gas peaked on April 9 at $3.997/gallon. Both returned to normal until August. Commodities traders began bidding up oil prices to $117.48/barrel on September 14. They were hedging against the Federal Reserve's QE3 program, which they thought would lower the value of the dollar. Since oil is priced in dollars, a lowered dollar value would force oil higher. Then Hurricane Isaac closed refineries, sending gas prices to $3.939/gallon by September 17. Gas prices rose to $4.50 a gallon in California, thanks to local distribution shortages.
2013 - Oil rose swiftly to $118.90/barrel on February 8. This sent gas prices to $3.85/gallon by February 25. Prices had started rising earlier than normal because of Iran's aggressive war games near the Strait of Hormuz.
2014 - Prices fell to $62/barrel by the end of the year. Gas prices fell to $2.45 a gallon. That's because the United States produced plenty of shale oil. In addition, the Organization of the Petroleum Exporting Countries didn't lower supply quotas.
2015 - Prices fell below $36/barrel in December. That drove gas prices below $2.00 a gallon.
2016 - The price continued to fall in January to $26/barrel by the end of the month.
Gas prices fell to $1.83/gallon on February 15. When OPEC announced a production cutback in November, oil prices rose above $54/barrel in December. Gas prices rose to $2.42/gallon.
2017 - Prices of oil and gas will rise according to the Energy Information Administration's crude oil price forecast.
The oil price history recounts West Texas Intermediate oil prices since 1974.
Causes
Like most of the things you buy, supply and demand affect oil prices. More demand, like the summer driving season, creates higher prices. There is less demand in the winter since only the northeast United States uses heating oil. But these are just one of the factors that determines oil prices.
Oil price futures, traded on the commodities exchange, also affect oil prices. These prices fluctuate daily, depending on what investors think the price of oil will be going forward.
Commodities traders are a big factor in making oil prices so high.
Impact
OPEC is an organization of 12 oil-producing countries that produce 46 percent of the world's oil. In 1960, these countries formed an alliance to regulate the supply and the price of oil. They realized they had a non-renewable resource. If they competed with each other, the price of oil would be so low that they would run out sooner than if oil prices were higher.
The 1973 OPEC oil embargo was the first time OPEC flexed its muscles. It cut off oil to the United States. This limited supply. Prices rose and shifted power away from U.S. oil producers. OPEC's goal was to keep the price of oil at around $70 per barrel. A higher price would have given other countries the incentive to drill new fields, which are too expensive to open when prices are low.
The United States stores 700 million barrels of oil in the Strategic Petroleum Reserves. The federal government uses it to increase supply when necessary, such as what they did after Hurricane Katrina. The government also uses this reserve to ward off the possibility of political threats from oil-producing nations.
The United States also imports oil from non-OPEC member, Mexico. This makes it less dependent on OPEC oil. The North American Free Trade Agreement is a free trade agreement that keeps the price of oil from Mexico low since it reduces trade tariffs.
What Affects Demand
The United States uses 21 percent of the world's oil. Two-thirds of this is for transportation. The country built a vast network of federal highways leading to suburbs in the 1950s. This decentralization was in response to the threat of nuclear attack, which was a great concern then. As a result, America did not develop the infrastructure for a national mass transit system.
Utilizing 15 percent of the world's oil production, the European Union is the next biggest user. China now uses 11 percent, as its use has grown rapidly.
What Else Affects Oil Price Futures
Oil futures, or futures contracts, are agreements to buy or sell oil at a specific date in the future at a specific price. Traders in oil futures bid on the price of oil based on what they think the future price will be. They look at projected supply and demand to determine the price. If traders think demand will increase because the global economy is growing, they will drive up the price of oil. This can create high oil prices even when there is plenty of supply on hand.
It's called an asset bubble. This happened to gold prices during the summer of 2011. It happened in the stock market in 2007 and in housing in 2006. When the housing bubble burst, it led to the 2008 financial crisis.
In cases where domestic prices are regulated, a responsive government would implement a decline in pump price at the instance of the decline in international crude price. But most LDCs do not reflect this until there was an uproar from the masses coupled with massive industrial actions. A case in view is Nigeria
No, I Think it's a question of the needed amount of gas in the international market.
Oil Reaches Highest Since Late 2014 After U.S. Surplus Shrinks
"Crude settled at the highest since 2014 as shrinking U.S. oil, gasoline and diesel stockpiles signaled tightening global supplies...
Crude this month climbed to levels not seen in more than three years as global markets tightened and geopolitical tensions in the Middle East heightened supply concerns. Despite surging U.S. crude production, surpluses stored in terminals and tankers have been shrinking..."
https://www.bloomberg.com/news/articles/2018-05-16/oil-drops-near-71-as-industry-data-shows-u-s-inventories-rise
This is real global market disturbance!
Attacks on Saudi oil supply effectively wipe out the world’s spare capacity
The attacks on critical oil production facilities in Saudi Arabia over the weekend will effectively wipe out the world’s spare oil capacity, an expert from S&P Global Platts said on Monday.
An oil processing facility at Abqaiq and the nearby Khurais oil field were attacked on Saturday, knocking out 5.7 million barrels of daily crude production — or 50% of the kingdom’s oil output. That’s more than 5% of global daily oil production.
The country’s national oil company, Saudi Aramco, has 35 to 40 days of supply to meet contractual obligations, according to a source close to the matter...
https://www.plantservices.com/industrynews/2019/report-attacks-on-saudi-oil-supply-effectively-wipe-out-the-worlds-spare-capacity/?utm_source=hs_email&utm_medium=email&utm_content=76892298&_hsenc=p2ANqtz-8KVFAQy17BSUG9qI_FVzPXEYZFoKXH4f3jTMmMpj875f5E_pIR6-VQklYhPb-WRkaGs_n3oWv7myKEHnBiYn3JdOkfLw&_hsmi=76892298
https://www.cnbc.com/2019/09/16/aramco-saudi-arabia-attacks-on-oil-supply-wipes-out-spare-capacity.html
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