GasBuddy, the online gasoline price tracking service, recently released a study forecasting the direction in which prices were likely to head in 2019. According to the report, gasoline prices, which are currently at their lowest level in 18 months, could be headed up by 35 percent five months from now, as early as the month of May. The major oil exporting nations are likely to cut production in order to prop prices up and send them higher.
Prices Have Been Low for Months
The beginning of 2019 saw gasoline prices get off to the slowest start seen in two years. Back in 2016, prices across the country were in freefall, dipping to $1.66 a gallon at a point. There wasn’t a dramatic difference on January 2, 2019, when gasoline prices hit $2.22, the lowest levels seen since President Trump entered office.
Prices have fallen nearly every day over the last three months. America is spending a quarter-billion dollars less on gasoline today than it did three months ago.
Changes Ahead
In a recent tweet, President Trump took credit for the low oil prices, celebrating with the announcement that they were “like a tax cut” for the American public. Whether policies of the administration had a lot to do with low oil prices isn’t clear, however. The administration’s China trade deal, however, may have an impact on oil prices. It’s hard to know what that impact will be at this point, however.
Whatever happens, it is likely that current low prices will not hold for long. While consumers have welcomed low oil prices, these happy times may begin to stall as early as two months into the new year, as prices begin to rally on actions by OPEC to prop up prices. A strong U.S. economy is likely to keep prices high as well.
The Production Cuts by OPEC
October was a notable month for high oil prices. Prices rose to a four-year high in that month. As prices slumped after that point, Russia and OPEC member states met in December to cut production by 1.2 million bpd over October levels. The idea was to put less product on the market in order to send prices higher. Production cuts now begin in January, and are planned for six months. Output levels will see a review by April.
According to Sigma Drilling Technologies, the pulsation solutions company that specializes in suction stabilizer products, the fact that prices are set to rise means that American drillers can look forward to a productive 2019. They do need to keep maintenance and repair in mind to ensure that their operations are stable, however.
GasBuddy’s petroleum analysts expect that prices at the pump could move up to $2.58 by March, and the national average could be as high as $3 a gallon starting in the month of May. That would be a rise of 35 percent from the beginning of January.
Prices Heading to $3 Levels?
The national average could have hit $3 levels in 2018, but it failed to do that. The possibility is much stronger this year. Prices could rise from the $1.99 level of today to $3 levels by spring. Nine out of 10 of the largest metropolitan areas of the country could see a turnaround for gas prices in just a couple of months. GasBuddy’s forecasts tend to be accurate. In 2018, the service saw gas prices peaking at $2.89 a gallon, and the year ended at $2.98.
A lot depends on the president’s policies. Should a trade war or other such possibilities actually come into play, it could slow the economy down and drag gas prices along with it. In the coming year, gas prices and the economy will move in unison.
