Will OPEC’s Oil Production Cut Affect the Decline in Gas Prices?

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The recent steep plunge in domestic gas prices may be affected by the results of the Dec. 4 meeting of OPEC+, a group of 23 oil-producing nations, including Saudi Arabia and Russia.

Domestic gasoline prices have dropped 26 cents nationally in the past two weeks. But OPEC+ decided to maintain output cuts of 2 million barrels per day, about 2% of world demand. The purpose of the move is to boost the global price of oil, which has fallen recently on fears of demand weakness, specifically in China.

Regardless, the national average pump price for a gallon of gas dropped 14 cents in the past week to $3.40.

“Gas prices are dropping sharply and are only a nickel more per gallon than a year ago,” said Andrew Gross, AAA spokesperson. “But with oil being the main ingredient in gasoline, OPEC+’s move could slow this decline. However, the gas price will likely soon be lower than it was a year ago.”

According to data from the Energy Information Administration (EIA), gas demand held steady at 3.2 million b/d. Meanwhile, total domestic gasoline stocks rose by nearly 2.8 million bbl to 213.8 million bbl. Increasing supply and steady gasoline demand have contributed to pushing pump prices lower.

The Dec. 5 national average of $3.40 is 39 cents less than a month ago and 5 cents more than a year ago.

The nation’s top 10 largest weekly decreases: California (-27 cents), Oregon (-26 cents), Nevada (-22 cents), Indiana (-22 cents), Alaska (-21 cents), Washington (-21 cents), Michigan (-19 cents), Arizona (-19 cents), Illinois (-19 cents) and Montana (-19 cents).

The nation’s top 10 least expensive markets: Texas ($2.78), Oklahoma ($2.86), Arkansas ($2.92), Mississippi ($2.94), Missouri ($2.95), Georgia ($2.95), Louisiana ($2.96), Tennessee ($2.98), Kansas ($2.99) and Wisconsin ($3.01).

Source: AAA

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