Gasoline prices likely will rise in 2018, bolstered by OPEC’s vow to continue curtailing oil production, falling inventories and rising oil prices in the wake of an improving global economy, according to industry observers.
Local gasoline prices are getting a jump on projections, standing a nickel above what they were a week earlier and continuing to increase between Monday and Tuesday, GasBuddy.com petroleum analyst Patrick DeHaan said by phone Tuesday.
Discussing national trends, DeHaan wrote in his weekly report that next year is looking “ominous” because the Organization of Petroleum Exporting Countries, Russia and other non-OPEC producers have agreed to extend through 2018 their pledge to cut output by 1.8 million barrels per day, a move meant to eliminate excess oil in storage.
“U.S. oil inventories are already 100 million barrels lower than they were last year as a result of belt-tightening, leading 2017’s yearly average gas price to close out at the highest level since 2014,” DeHaan wrote.
Even after falling 3.5 cents the past week, the national average for a gallon of regular unleaded was hovering at about $2.46 Monday. Prices locally have stabilized, having dipped and increased fractionally in recent days. On Tuesday, the average price for a gallon of regular unleaded stood at $2.18, up from $2.15 a month earlier, according to GasBuddy.com.
DeHaan said the fall in prices nationally does not necessarily reflect market conditions normally seen this time of year. He said oil distribution problems in the Midwest, specifically in states near the Great Lakes region, caused prices to increase. They are falling with the completion of repairs.
“Motorists should enjoy the falling prices now because it is likely they may again rise approaching the new year, as oil prices continue to show strength,” DeHaan said.
The price of a barrel of West Texas Intermediate crude is hovering at about $58, he said.
Late in the day Tuesday, after DeHaan released his report, Oilprice.com revealed the American Petroleum Institute was reporting “a large draw of 5.481 million barrels of United States crude oil inventories for the week ending Dec. 1, while analysts had expected a drawdown of 3.507 million barrels.” The news may improve the mood of investors who were disappointed OPEC’s decision to continue its production curtailment did not immediately lift oil prices, according to the report.
The API also reported a “massive build” of gasoline inventories totaling 9.2 million barrels during the week ending Friday. Analysts had predicted a much smaller build of 1.14 million barrels, according to Oilprice.com.
“This week’s unexpectedly large build in gasoline inventories is likely to put downward pressure on oil prices,” according to the report.
Karr Ingham, an Amarillo-based economist who prepares a monthly snapshot of local trends and also serves as petroleum economist for the Texas Alliance of Energy Producers, said he could see gasoline prices rising 15 to 20 cents in 2018, not enough to create problems for what he considers a “generally solid local economy.”
Rising gasoline prices could prove challenging to individual families, Ingham said. But overall, economic trends locally are on the upswing, with employment and construction showing improvement.
President Trump has proposed cutting corporate taxes from 35 percent to 20 percent, which could create economic expansion that pushes gas prices higher, Ingham said. He said he supports the measure.
“I don’t say that as a politician. I don’t care who wins. Frankly, I would prefer a 10 percent flat tax, with exemptions for those with wages on the lower end,” Ingham said. “But I believe tax cuts can serve to stimulate the economy. True, a growing economy also creates upward pressure on oil and gas prices, but it also creates opportunity.”
Todd Stoner, founder of Disciplined Investors in Waco, said a “synchronized global expansion” is creating increased demand for petroleum products.
“Virtually every foreign economy, as well as that of the United States, is enjoying economic growth,” Stoner said.
The stock market, which steamed past the 24,000 threshold this week, likes the tax cuts and the economic growth they portend, Stoner said. Corporate profits are on pace to increase 10 percent this year, he said.
These bullish indicators could mean higher prices for crude oil and gasoline, Stoner said.
“But OPEC does not want prices to go too high,” he said. “That could cause the U.S. and other countries to step up their drilling.”
Despite recent increases, AAA Texas expects prices to dip through the end of the year, according to a press release.
“While AAA does expect gas prices to decline between now and the end of the year, motorists will still pay the highest November and December gas prices since 2014,” the press release states. “The statewide average is 34 cents higher than it was one year ago.”
Gasoline prices will trend lower early in 2018, “but OPEC’s decisions to further cut or keep production rates stable will influence longer-term forecasts for the year,” according to the press release.