OPEC’s influence felt nationwide
SUMMIT COUNTY – Gas prices took another hike this week, portending a summer of at least $2 per gallon for regular unleaded gasoline.
Two weeks ago, the average price of a gallon of gasoline in Summit County was hovering around $1.57. This week, it ranges from $1.67 to $1.89. Some analysts say nationwide prices will hit a peak of $1.83 before they start to go down again.
The hikes are due to OPEC’s plans to reduce oil production by 1 million barrels a day beginning April 1 and coastal refineries halting operations to convert their systems for summer gasoline blends required by clean air laws.
Also, demand for gasoline during summer vacations typically jacks the demand of gasoline by 6 percent – from 8.7 million barrels to 9.5 to 10 million barrels – each summer.
OPEC has the potential to influence oil prices worldwide because its members possess such a great portion of the world’s oil supply. OPEC accounts for about 38 percent of the world’s production of crude oil and holds more than two-thirds of the world’s estimated crude oil reserves.
OPEC had also agreed to eliminate about 1.5 million barrels a day of what is called quota busting – exceeding agreed-upon limits on production to take advantage of high prices. If OPEC members stick to the agreement, the two measures would cut OPEC’s daily output by about 10 percent. The cut would bring output limits to 23.5 million barrels per day.
The U.S. refining system has not seen a major refinery built since 1976. Since 1980, the number of refineries in the U.S. has shrunk from 320 capable of refining 18.6 million barrels of crude oil every day to 150 with a production capacity of 16.5 million barrels per day. At the same time, fuel consumption has increased from 115 billion gallons per year to more than 160 billion gallons per year.
According to Mary Green of the American Automobile Association (AAA), which tracks fuel prices, the nationwide average price peaked this year at $1.737 per gallon, .7 cents higher than last year’s peak of $1.730 set Aug. 30. The all-time record of $1.820 was set on June 5, 2001.
Some analysts say recent hikes support earlier predictions of two price spikes this year. The first has just occurred, and the other, larger spike will take place in April or May.
Political events in Venezuela – the fourth largest supplier of crude oil to the United States – will also play a role in the price of oil. Today, the price of a barrel of oil is $36.50; in 2001, it was $22.95.
Regional price fluctuations also vary depending on how far the supply is from the distribution point, supply disruptions, state or regional environmental programs, operating costs and local competition.
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