AAA: ‘Gas price surge’ avoided

Published 4:05 pm Friday, May 26, 2017

Motorists will not have to worry about surging gas prices this holiday weekend after all. Thursday’s OPEC meeting had the potential to cause a stir in the stock market. What actually happened was quite the opposite.

A collection of OPEC and non-OPEC oil producing countries met on Thursday to re-evaluate their existing agreement that calls for a reduction of 1.8 million barrels of crude output per day. This agreement – implemented in November – was an attempt to reduce global crude oversupply and drive up oil prices to $60 per barrel. Within a month, oil prices rose nearly $10 and gas prices climbed 15-30 cents. The price for a barrel of oil reached as high as $54.45 (WTI) in February. This higher price attracted other oil producers – who were not part of the pact – to cash-in. EIA data showed increased oil production from the U.S., Libya, and Nigeria; which countered OPEC’s efforts, pushing oil prices back below $50 in March.

Oil prices climbed above $51 this week, as expectations grew that OPEC would not only extend the production cut to nine months instead of six, but also implement deeper cuts. On Thursday, OPEC agreed to extend the output cut another nine months, but at the same level. As a result, oil prices dropped nearly $3, settling at $48.90 per barrel.

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“The expectation of a 9-month extension was already baked into the price of crude oil, so when no additional cuts were passed, the market lost excitement and oil dropped,” said Mark Jenkins, spokesman, AAA – The Auto Club Group. “This is good news for motorists, because it makes gas prices a little more predictable for Memorial Day weekend. Retail prices should hold steady, with the possibility for minor fluctuations of only a few pennies at the pump.”

Thursday’s average price for a gallon of gasoline in Georgia was $2.22 – 5 cents less than last year’s holiday, and 41 cents less than Memorial Day 2015.