Hey Taylor – I thought it seemed like gas prices were coming down, but just read about OPEC cutting production or something and now I’m worried prices will skyrocket again in the summer. Any idea where things are headed?

Hey Manny – Predicting gas prices is not my forte, since the swings are predictably unpredictable. From what I’ve read, the highest prices are behind us, but there are too many variables for me to make promises. The best we can do is understand the cost drivers and be prepared for anything.

–1. The OPEC issue. The Organization of Petroleum Exporting Countries (OPEC) is somewhat synonymous with gas and gas prices, so we all have a bit of a knee-jerk reaction when we hear anything about what that organization is doing with regard to supply. However, the reasons for OPEC’s supply reduction, which started last year and is going to continue through 2025, is that the US has bumped up production and global demand has actually been decreasing. The oil industry is still recovering from travel all but stopping during the pandemic, and with three million+ electric vehicles registered in the United States alone, oil exporters are actually starting to react to fewer consumers heading to the pumps.

–2. Spring versus Summer. For years, I assumed summer was the time for highest gas prices because of all the travel. While we’ve had a few summer peaks, the cost per barrel often jumps the most in spring because that’s when many refineries slow production for annual maintenance. Prices spiked in April and have been coming down since then, even though the timing made a lot of people feel like a summer surge was on the way. The cost is also speculative, as refineries need to move their product months before it’s actually purchased by consumers. Now that we’re in June, summer supply is already somewhat established.

–3. Variables. We know that people are going to travel and we know, generally, how much oil the biggest distributors are going to deliver. What we don’t know is how the weather and the geopolitical landscape will impact supply and the price per gallon. If a hurricane hits the Gulf Coast and causes massive disruption, that could drive up costs. If there’s an uprising or an outburst in the Middle East that puts everyone on edge, that could make everything more expensive. Crude oil is the great global commodity, used and demanded by every country on the planet, so a lot of factors play into the price of gas in the US.

I can’t predict what’s going to happen, but I will tell you not to panic about any OPEC news and just take the gas prices as they come. Things are cheaper now than they were in April, there’s no data suggesting cost is about to go through the roof, and hopefully, that will remain the case. Thanks for the question, Manny!

 

TAYLOR J KOVAR

CHIEF EXECUTIVE OFFICER

CERTIFIED FINANCIAL PLANNER™