It’s often known that in the summer, you’ll be paying more for gas. Rising prices typically signal a boost in demand as more people decide to go on trips and family vacations during the summer months.
Last Friday, President Trump made a tweet that might’ve spurred OPEC into action, stating that he hopes they will increase their output substantially to keep the price of oil down.
It wasn’t but a short time later when OPEC announced that they would indeed boost their production, flooding the market with oil and ultimately lowering the price at the pump.
In 2016, gas prices were falling significantly to the point where the major oil companies were having to lay off thousands of workers collectively to maintain profits. OPEC struck a deal with Russia and other major oil producers to curb production and cut the excess supply that kept the prices ridiculously low.
A lot can change in a few years, as now the world is concerned about an oil shortage. Prices have spiked 20% as demand has risen due to an improved economy in the U.S. and outages in major oil producing countries like Venezuela.
OPEC looks to increase the production by one million barrels, which will help ease some of those concerns and lower the prices, but the concern is that they would need to increase the output by 2 million barrels to keep up with current demand. That’s going to be a problem, as a lot of OPEC members will struggle to increase their production.
It’s expected that the increase will hit the global markets in July, but it has not yet been decided which countries would ramp up their production. In fact, gas prices rose at the end of last week as many investors actually expected to hear better news.
Cornelia Meyer, energy analyst and CEO of MRL Corporation, said last week that the OPEC leaders were “there own worst enemies” and that the current increase is “enough” to supply demand.
While we as consumers can be glad for lower prices this summer, a shortage is still expected later in the year unless OPEC can figure it out before then.