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By Staff on Mar 19, 2010 with 2 responses

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.

This article was republished with permission from Taipan Publishing Group.

  1. By RBM on March 20, 2010 at 4:44 pm

    the consumer is looking at the price

     

    This consumer is thankful that he’s only got a couple miles to drive to his temperary employment – and strongly disagrees with the minister – this in NOT ‘beautiful’ for and underemployed individual, such as myself !

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  2. By CEA on March 23, 2010 at 1:51 pm

    -By the time a farm product reaches the home of the average American consumer, substantial amounts of energy have been used to produce, package, ship and store it. Petroleum-based products and natural gas are required for all aspects of farming, including food processing, agricultural chemicals, fertilizers, irrigation energy, crop drying and heated farm buildings. The abundance of cheap oil and natural gas long made such necessary elements affordable for American farmers.
    At today’s oil and natural gas prices, the American agricultural industry faces some tough challenges. The ability of American farmers to produce a sufficient and affordable food supply for the American public is in danger. Rising energy prices will create higher production costs and increased fertilizer prices, yet many farmers will be unable to fully transfer those costs to the consumer. The result could be a serious decrease in net farm income, which could alter the landscape of rural America and force difficult employment, travel and lifestyle decisions upon families.
    Domestic energy production is key to the economic fruition of America. Instead of spending our wealth abroad for foreign resources, we have a chance to strengthen America’s energy portfolio with our own.
    Want to learn more about balanced energy for America? Visit http://www.consumerenergyalliance.org to get involved, discover CEA’s mission and sign up for our informative newsletter.

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