Gas prices in limbo as OPEC weighs production options

KENNEWICK, Wash.-- Gas prices in the Tri-Cities have fallen slightly over the past two weeks, but that could change depending on whether international oil producers decide to keep production at its current levels, or increase production.

According to Bloomberg, the Organization of Petroleum Exporting Countries (OPEC) reduced projections for global fuel consumption in the first quarter of 2021 by 1 million barrels a day. OPEC's monthly report predicted that demand will increase by just 500,000 barrels from that quarter -- the same amount the cartel and its partners agreed they’ll add in January.

Right now in the Tri-Cities we're paying about $2.37 for a gallon of regular unleaded. That's about 6 cents less than two weeks ago, and significantly less than the state-wide average of $2.72 per gallon.

	1-Dec	15-Dec	Diff
Tri-Cities	$2.43	$2.37	-$0.06
Walla Walla	$2.64	$2.32	-$0.32
Adams Co.	$2.59	$2.66	$0.07
Grant Co.	$2.51	$2.56	$0.05
Umatilla Co.	$2.31	$2.35	$0.04
Morrow Co.	$2.57	$2.55	-$0.02

December gas prices in our region, according to Gas Buddy.

With the release of a vaccine for COVID-19, industry analysts expect fuel usage to increase, and that increased demand could force prices to rise quickly, though the modest increase predicted by OPEC indicates that recovery could be slower than many anticipated. However, OPEC's forecast could also be a signal that they plan to continue at current production rates which could in turn increase production in order to keep crude prices low.

"Of course, if oil prices go up, that would lure more U.S. oil production back online, and they're probably acting to stem an increase or rebound in U.S. oil production," said Patrick DeHaan with Gas Buddy.

Crude oil prices took a nose dive earlier in the year when social distancing and closure orders related to COVID-19 forced drivers off the roads, drastically reducing demand.

Right now, average gas prices in Washington are about 40 cents lower than one year ago, well below the profitability threshold that oil producers in the U.S. use to determine whether to fire up production operations.

Reducing production and keeping prices low could also help OPEC in another one of its key goals-- to reduce the glut of international crude inventory that built up in the immediate onset of the coronavirus pandemic.