Drivers across the country can rejoice: after several weeks of steady increases in the cost of oil and gasoline, prices are expected to fall severely this week and into the future for some time. Having surged to their highest level in over three years last week, prices are starting to slump. It’s just in time for summer vacation too, so rev up those propane grills and book those road trips.
The move to decrease prices was triggered on Friday by the biggest oil exporter in the world, Saudi Arabia. Also, the de facto leader of global oil organization OPEC, officials stated that the country is in talks with Russia and other member nations to pump more oil to ease global supply concerns.
"It is the intent of all producers to ensure that the oil market remains healthy, and if that means adjusting our policy in June, we are certainly prepared to do it," said Saudi energy minister Khalid Al-Falih.
Russia and OPEC oil producer countries had placed self-imposed supply caps, a common tactic to control the price of barrels, since 2017. A meeting in Vienna on June 22 between Russia and these countries may see a lift or reduction in these caps.
The move may be designed to support the global economy as a response to US sanctions on Iran and the possibility of a collapse in production from Venezuela.
For some analysts, however, the outlook may not be so bright after all. While OPEC may be determined to keep oil prices trading at current levels—for the betterment of every country globally—politics may veer this trajectory off course. During the press conference held on Friday, Saudi officials mentioned that a total collapse in Venezuelan oil production could cause crude oil prices to skyrocket to $100 a barrel. The effects could be severe.
"I think what they are concerned about is that they ideally would like to avoid a spike in the oil price, let's say towards $100 a barrel, because they are very sensitive to the fact that a spike would then lead to a generalized global downturn," said Bob Parker, investment committee member at Quilvest Wealth Management.
The country has been rocked with economic crises and chronic food shortages in the past few years, sparking civil unrest and inflation. The Venezuelan leader has even dabbled in utilizing cryptocurrency to garner interest and investment in foreign bankers. One of the leaders in crude oil production in South America, a devastating 40% drop in production has occurred since 2015. Now the region reportedly pumps out a meager 1.4 million barrels a day.
Many people are confused as to what drives or define the price of a barrel of gasoline in the market. While some may believe supply and demand govern the costs, the price of oil is actually determined by a futures contract, which is a binding agreement that enables governments to purchase oil by the barrel at predefined prices. Certain circumstances, such as natural disasters, may cause an immediate shift in price per barrel as supply and demand are thrown into flux, however.
Regardless of what may happen, drivers should enjoy the slight discount in gas prices for the next few weeks!