U.S. oil market in turmoil as gas prices plummet amid OPEC+ scramble

The oil market is experiencing significant volatility, with the OPEC+ group scrambling to stabilize prices. Meanwhile, gas prices in the U.S. have dropped sharply, offering relief to consumers but causing concern within OPEC+.

U.S. gas prices hit a six-month low on Thursday, falling to $3.31 per gallon, a 50-cent drop from the same time last year, according to AAA. In 10 states, including Texas, Kentucky, and Kansas, the average gas price is now below $3 per gallon. Andy Lipow, president of Lipow Oil Associates, predicts that nine more states will likely join this sub-$3 category in the next two weeks.

Data from OPIS indicates that nearly 41,000 out of 130,000 gas stations nationwide are already charging less than $3 per gallon. This is a stark contrast to the same time last year, when fewer than 100 stations offered prices below $3.

By Thanksgiving, up to 40 states could see gas prices drop below $3 per gallon, according to GasBuddy’s Patrick De Haan. The significant decline in gas prices is expected to ease consumer financial pressures and could contribute to cooling inflation, potentially leading the Federal Reserve to lower interest rates.

This trend could also impact the upcoming November election, as voters weigh the economic performance of the current administration. Lower gas prices, particularly in battleground states such as Arizona, Nevada, and Georgia, may favor Vice President Kamala Harris’s prospects.

Despite the efforts of OPEC+, the oil market remains weak, driven by concerns over soft demand in China and record-high production levels in the United States. OPEC+, led by Saudi Arabia and Russia, recently scrapped plans to increase supply starting October 1. However, this decision did little to boost oil prices, which ended Thursday slightly down at $69.15 per barrel, the lowest since December.

Bob McNally, founder of Rapidan Energy Group, noted that the market remains bearish, with continued downward pressure on gas prices expected in the coming weeks. Despite speculation, McNally does not believe OPEC+’s decision was influenced by the U.S. political calendar.

However, the oil market is highly volatile, and any disruption in supply from the Middle East or escalation in the Russia-Ukraine conflict could reverse the current downward trend in gas prices.

Former President Trump has promised to lower gas prices to below $2 per gallon, but experts like Tom Kloza of the Oil Price Information Service caution that such claims are unrealistic without a severe economic downturn. The U.S. is currently producing more oil than at any point during Trump’s presidency, with recent output reaching 13.4 million barrels per day.

Trump also pointed to the ultra-low gas prices of $1.87 per gallon during his term, though these occurred during the height of the Covid-19 pandemic when demand was drastically reduced. “No one wants to return to those pandemic times,” Lipow remarked.

Credit: CNN