Oil prices are rising — What does it mean for you?

July 16, 2021   By Jackie Whetzel

Oil prices are rising — What does it mean for you?

Crude oil prices hit a multi-year high in June after weeks of gains. The West Texas Intermediate shot above $75 a barrel, its highest price since October 2018, and the international energy benchmark Brent Crude went above $72 a barrel, its highest since May 2019. 

The Organization of the Petroleum Exporting Countries (OPEC) says it will try to help meet consumer demand by increasing oil production this summer. However, the average oil consumer may still be affected, as experts predict the cost of a barrel could hit $100 by next year.

In a note shared by Oilprice.com, Bank of America Global Research Analysts said, “We believe that the robust global oil demand recovery will outpace supply growth over the next 18 months, further draining inventories and setting the stage for higher oil prices.”

Their analysts say the global oil market will not be able to meet customer demand which could result in a shortage of an estimated 900,000 barrels per day within the next year and a half.

What does this mean for consumers?

You’re probably going to pay more at the pump for gasoline, as prices are generally determined by crude oil prices. Prices are already slowly climbing in most parts of the country. 

According to the Associated Press, the national average price of gasoline is already “almost 5 cents higher than a month ago and 92 cents higher than this time last year.” 

If you’ve cringed over the small increases you’ve paid at your local gas station, you might want to brace yourself as it’s probably going to get worse before it gets better.

Have no worries though. We have a few tips to help you save:

Shop around

Don’t buy gas at the first gas station you see. While it may sound contradictory to drive further to fill up your tank, it may actually save you money in the long run, as many gas stations have big price fluctuations. Pay attention to gas prices when you’re on your normal work or leisure commute and make note of what stations offer the best prices.

For instance, on July 11, one gas franchise was offering motorists in Charlotte, North Carolina gas for 3.09 a gallon. Meanwhile, another franchise 10 minutes away in Huntersville was selling the same level of gasoline for $2.93.

If you live close to a state line, look into how much gasoline is in the neighboring state, as sometimes there’s a big difference that may be worth the ride. There are also many apps out there like AAA and GasBuddy, which can help you find the cheapest prices in your area.

Look into loyalty programs

If your gas station offers a rewards program, sign up for it! Also, look into loyalty programs through your local bank or credit card company. Oftentimes these companies will offer free or discounted gas as a perk for using your credit card or paying off your balance. Another tip is to look into warehouse loyalty programs, such as Sam’s Club, Costco, or BJ’s, which usually offer discounted gasoline that you can purchase if you’re a member. 

Roll down the windows and turn off the radio

If you live in a hot climate like Texas, this may not be possible. But if you live in a milder climate, consider turning off the air conditioner this summer, roll down the windows and enjoy the breeze while you drive. Saying no to the car A/C can save 10 to 20 percent in fuel economy, as long as you’re not traveling at a high speed on an interstate. When driving on a highway, roll the windows up, as the aerodynamics of traveling at high speeds with the windows down could actually cost 10 percent more. Another tip is to turn off the radio. Using fewer gadgets will save you gasoline (and dollars) in the long run. 

Keep the air in your tiles full

Check your tire’s air pressure every month and make sure all four tires are filled to the recommended air pressure. Driving around on under-inflated tires can cost you two percent in fuel efficiency, wasting money. As an added bonus, riding on properly inflated tires will also expand their lifespan by preventing wear. Check your vehicle’s owner manual to find the optimal pressure level. 

Go the speed limit

Don’t speed. Driving the recommended speed limit is always best for safety reasons, and it can also save you money on gasoline efficiency. For example, you will use 20 percent more gasoline if you drive 70 miles an hour versus 55 mph. 

How will this impact gas prices in the future?

As of July 3, 2021, the national average for a tank of gas was $3.12, according to AAA, which predicts that gas prices will continue climbing throughout the summer. Texas had one of the lowest average gas prices that week ($2.80), along with Mississippi ($2.75). California had the highest average price in the country at $4.29 a gallon.

For now, gasoline stock prices are helping to stabilize things. According to an Energy Information Administration (EIA) report, gasoline stocks were recently sitting at 242.9 million bbl, a 9 million bbl surplus over last year. 

In addition to the stock market, U.S. oil refineries in areas such as Texas, Mississippi, Pascagoula, and the East Coast have also helped by searching for cheaper ways to maximize their gasoline production — especially during the summer months when demand is higher with vacation travel. 

Some oil refineries are using low-sulfur vacuum gas oil (VGO) which requires less crude oil.

VGO is used as a feedstock to escalate gasoline production in response to rising oil prices.

“This year in particular with gasoline demand expected to be stronger than middle distillate, diesel gas oil jet, you could see refiners opt to import VGO to run through a cat cracker if the price is right,” Chris Barber, principal analyst at ESAI, said in a 2021 Bloomberg article. “It would allow them to produce gasoline without a lot of additional diesel or middle distillate.”

However, according to the same article, VGO prices are also rising thanks to the old supply and demand issue. It was $81 a barrel, or $6 more than the West Text Intermediate, on July 1, which makes it a less attractive option in terms of financial gain.

While most people will likely pay a little more at the pump while crude oil prices are high, rising prices shouldn’t have a negative effect on the world’s economy.

According to a July 8, Wall Street Journal article, economists say “strong growth and flush consumers in advanced economies will help the world absorb much of the blow from costlier crude.”

“In the scheme of things this is pretty small,” reported Gus Faucher, chief economist at the PNC Financial Services, said.

 

Jackie Whetzel is a freelance writer who has been featured in newspapers and publications across the country. She has written on the topics of energy, education, government, and business. You can find her on  LinkedIn or Instagram.

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