OPEC Smiles as Gas Prices Rise Toward $3 at the Pump
By Todd M. Schoenberger, Managing Editor, Taipan Publishing’s Tipping Point Alert
As expected, the 12-member cartel known as the Organization of Petroleum Exporting Countries (OPEC) opted to keep its current production quotas in place following yesterday’s short six-hour meeting in Vienna. Crude oil prices rallied on the news and rose another 1.5% to close at a two-month high of $82.93 a barrel.
Traders at the New York Mercantile Exchange have been bidding up prices of crude oil with the expectation that global demand could increase as the economic recovery takes shape. With no changes in crude oil supply expected any time soon, prices per barrel should continue its ascent and chase the psychological $100 mark.
For now, however, OPEC seems to be quite pleased with oil prices north of $80 with no immediate plans to adjust output levels.
Current prices are “beautiful,” said Saudi Arabian Oil Minister Ali al-Naimi, when speaking to reporters prior to the OPEC meeting. “The producer is looking at this price, the consumer is looking at the price, the investor is looking at the price, and everybody is saying this is great.”
According to Jason Simpkins of MoneyMorning.com, OPEC, which supplies about 40% of the world’s crude oil, set its official cap at 24.845 million barrels per day in December 2008 and has kept it there for five straight meetings. In that time crude oil prices have more than doubled.
The wild card to deal with when it comes to higher crude oil prices is higher gasoline prices at the pump. And, since this is the season that consumers tend to see higher gasoline prices, the figures are expected to have an impact on discretionary incomes, which could hamper the economic recovery.
Across the country, retail prices at the pump have increased 3 cents in the past week, to settle at $2.787 for a gallon of unleaded fuel. The price one year ago was $2.092 a gallon.
According to The Post-Journal in New York, historical price data going back 10 years to the year 2000 shows gasoline prices have increased on average roughly 13% between March 1 and April 30.
“In these difficult times, gasoline prices pinch more than usual, and rising gasoline prices could be a drag on economic recovery,” the Natural Resources Defense Council said in a report released Wednesday. “This reality reminds us that America’s addiction to [crude] oil continues to threaten not only our national security and global environmental health, but also our economic strength.”
Americans need to prepare themselves for prices to touch $3 a gallon and spike higher as the country approaches the July 4th holiday. As crude oil prices rise, with no changes in supply by OPEC on the horizon, consumers will feel a hit to their wallets. For now, though, the one group happy to see higher prices at the pump are oil investors.
As Michael Fitzpatrick, Vice President of Energy at MF Global in New York, said to TopNews.com: OPEC “is not trying to stem the rise of prices by clamping down” on production, and this is supportive for the markets on the whole.