Fuel Prices To Hit $2.55 By Christmas With Help From OPEC

Cameron Aubernon
by Cameron Aubernon

Is your wallet feeling heavier these days, despite all of the blackened Thanksgivings and cybernetic Mondays meant to liberate you from your money? It’s about to become more so, thanks to an early Christmas present from OPEC.

CNBC reports OPEC decided in its meeting last week not to cut back oil production, preferring to defend its piece of the petroleum pie from shale drillers in the United States, whose efforts added 1 million barrels/day to the nation’s oil production in less than a year.

In turn, prices for West Texas Intermediate fell to $66.15/barrel, while fuel prices averaged $2.79/gallon over Thanksgiving, the lowest average since the same time in 2009. The price is expected to fall further, per Lipow Oil Associates president Andrew Lipow, who expects the average to hit between $2.55 and $2.60 per gallon nationwide by Christmas.

However, if OPEC hoped to thwart U.S. production — currently at 9 million barrels per day, a rate not seen since 1986 — the organization may be in for a shock. Lipow explains:

I expect oil production is going to continue to increase in the U.S. over the next three to four months as shale oil and Gulf of Mexico projects that are underway get completed.

Meanwhile, production at existing wells would be cut back as exploration and production companies look to refocus their budgets toward the most productive sites.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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14 of 29 comments
  • Schmitt trigger Schmitt trigger on Dec 01, 2014

    The really important thing here, the lowered oil revenue that will directly impact the income of petro-tyrants.

    • Felis Concolor Felis Concolor on Dec 01, 2014

      Precisely: it's not what $50/bbl does to their economies; it's what $50/bbl after years of $120/bbl does to their economies.

  • Thegamper Thegamper on Dec 01, 2014

    I think this should be seen as nothing but bad news for the United States. The article quoted omits some very pertinent facts. For one, Saudi Arabia lowered the price of oil shipments to the United States while at the same time raising them for shipments to Europe. This is a plain and simple price war meant to drive US domestic oil to bankruptcy. There is some debate over what the break even price for shale oil is in the US, I have seen some estimates that go as low as $40/Barrel, but $60/barrel seems a more accepted view. The price as it stands will lower investment in new development and probably limit production growth into 2015. If these actions were taken by Japanese automakers, industry and politicians would go ballistic with accusations of dumping. There is currently export restrictions on US produced oil, if you see sustained prices of $60/barrel or lower, expect increasing pressure from industry to lift those restrictions so they can export to higher priced markets. This hurts prices here. And then of course there is the fact that extremely low prices put Americans back into more and more trucks and SUVs, curtails development and sales of alternative vehicles and then a few years down the road when the US Shale industry is on its knees, there has been no new development in production capacity in years and output shrinks, we get hit with supply shocks and are stuck in gas guzzlers and right back to $120/barrel or higher prices. Such lack of foresight in the American consumer.

    • See 6 previous
    • Lorenzo Lorenzo on Dec 01, 2014

      @Pch101 The futures markets are setting prices from mid-January into February now. It may be a Christmas present, but it'll keep on giving through New Year's Day, Martin Luther King Day, and into Pres*dent's Day. If something changes, we won't see the effect until St. Patrick's Day or Easter. It'll probably be June when we see how the Saudi gambit shakes out. I'm guessing it'll take a full year to put a crimp in fracking.

  • Kyree Kyree on Dec 01, 2014

    I drove by a gasoline station last night and E10 gasoline was $2.30 a gallon. Yeah. Unfortunately, I paid $3.59 a gallon for diesel yesterday, and---thanks to a road trip---I'm due for a fill-up again.

    • See 1 previous
    • Jimbob457 Jimbob457 on Dec 02, 2014

      @Hummer Long haul truckers are usually pretty savvy about their business. If you knew what they know, maybe the difference in posted prices would make more sense? Or, maybe the guy with the high posted price is just slow to respond in a rapidly changing market?

  • Tbayfinn Tbayfinn on May 25, 2021

    Sad that the 10R60 isn't surviving in the Ford Explorer. The F clutch burnt in mine at 16,000 miles and the transmission had to be replaced due to no parts available. A similar story of woe can be found across the internet. Poor or non-existent testing? I'm sure a class action suit is on the horizon. My vehicle was in the shop for 2 months.