By on March 10, 2020

With the coronavirus keeping people indoors and shale drilling keeping U.S. oil prices relatively stable, you’ve probably noticed gasoline bills being quite reasonable of late. Well, don’t get used to the sums you’re paying now, as analysts project fuel prices will drop even lower as 2020 progresses. While you might think this is due to national quarantines and lessened demand, you’d only be half right.

Last week, the Organization of the Petroleum Exporting Countries (OPEC) failed to strike a deal that would have enacted production cuts to better stabilize the market. Instead of slashing output, Saudi Arabia started slashing prices as it sought ways to ramp up production. Russia immediately responded by promising to increase its own output, leading to what looks like an all-out price war. 

On Monday, oil prices dropped nearly 25 percent — knocking off about 10 bucks per barrel and leaving the per-barrel price hovering around $31. It was the largest single-day decline for U.S. West Texas Intermediate crude and Brent crude since 1991. While Tuesday morning saw a meaningful bump in prices as portions of the market came to its senses, OPEC members don’t seem to be on better terms.

According to Reuters, Saudi Arabia plans to supply 12.3 million barrels per day in April — a massive increase over its current production level of 9.7 million barrels per day. Russian oil minister Alexander Novak initially said he would not rule out joint measures with OPEC to stabilize the market, adding that the next OPEC+ meeting was planned for May-June. His tone changed slightly on Tuesday, however, with suggestions that the nation could raise its oil production by up to 300,000 barrels per day in the short term — something a few market analysts have claimed was its plan all along.

It’s probably not the best time for OPEC to try and tear itself apart (though that hasn’t stopped it in the past). China, the world’s largest oil importer, is currently hamstrung by the coronavirus. Other regions may follow shortly. Saudi Arabia seems to be attempting to grab market share but with demand so low, it’s a real gamble. Russia and U.S. shale producers are in a better position to weather the storm. Meanwhile, analysts are concerned the Arabian kingdom couldn’t possibly sustain the price cuts and increased output for any significant length of time without hurting itself.

While this could have long-term implications for the oil industry, it’s also likely to drive down gas prices though the spring. National averages (in the U.S.) are around $2.38 per gallon and dropping during a period where prices normally ramp up to meet higher summer demand. Patrick DeHaan, head of petroleum analysis at GasBuddy, expects per-gallon prices to fall below the two-dollar threshold by April if trends persist.

The International Energy Agency (IEA) is likewise concerned that the coronavirus could recreate what happened in 2016 when we had our last major global oil surplus. Bad for the world economy, but fantastic for your back account, as gas prices were similarly low back then. Of course, there are heaps of uncertainty in the market with varying assumptions as to how bad the pandemic will actually get. Many see it as a minor hurdle that will primarily impact China while others are convinced it will be much worse than anticipated. Most are simply shrugging their shoulders as they watch the market.

“The situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact of the virus will be,” the IEA reported this week. “In the IEA’s central base case, demand this year drops for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade.”

[Image: Gumpanat/Shutterstock]

Get the latest TTAC e-Newsletter!

Recommended

75 Comments on “OPEC Infighting and Coronavirus Adds Up to Affordable Gas...”


  • avatar
    dal20402

    While I’m all for anything that inflicts damage on the House of Saud, Putin doesn’t have enough in reserve to do real damage. After a month or so he’ll quietly cry uncle and we’ll be back to pre-COVID pricing.

    The loser will be the atmosphere, as all these extra barrels get turned promptly into CO2.

    • 0 avatar
      highdesertcat

      I don’t think it will be a month. Putin is meeting with his oil-cabal today to direct them to find ways to cooperate with the OPEC+.

      In the mean time back at the ranch, the derricks have started to pump a little slower, anticipating the coming glut of oil.

      Maybe we’ll see miles and miles of railroad tanker cars full of oil parked in the desert again, like we had seen before.

      Oh goody-goody, goody-goody!

    • 0 avatar
      ScarecrowRepair

      All that extra CO2 is good news for crops, and people too: cold kills far more people than heat.

    • 0 avatar
      2manycars

      CO2 is not a pollutant, so no concerns there. I’m happy to be making my “carbon footprint” as large as possible.

      https://realclimatescience.com

      • 0 avatar
        Lou_BC

        “CO2 is not a pollutant”

        That stupid meme was bound to surface. If there is an excess of something, it becomes a pollutant.
        Case in point, our bodies can easily ingest 2-3 litres of dihydrogen peroxide per day. That amount can become toxic if one has preexisting conditions like heart disease or kidney disease. 3,536 people die in the USA every year due to overdoses.
        My example is just as logical as your’s!

      • 0 avatar
        bd2

        That’s beyond stupid…

      • 0 avatar
        JimZ

        the Feynman quote at the top of that site doesn’t mean what they want you to think it does.

    • 0 avatar
      redapple

      TOTAL BS.
      GAS IS TOO CHEAP. IN 1969 GAS WAS 0.35$ / GALLON. ADJUSTED FOR INFLATION, THAT IS $2.50 TODAY !!

      I DONT BELIEVE IN MAN MADE GLOBAL WARMING (VLADIVOSTOK ICE CORE SAMPLE STUDY). BUT, WE SHOULD CONSERVE IT.
      1 IT ENRICHES OUR ENEMIES.
      2 IT POLLUTES.
      3 IT IS A FINITE RESOURCE.

      SO USING ANY TWISTED LOGIC, DOES IT MAKE SENSE FOR IT TO BE CHEAPER NOW THAN 50 YEARS AGO.
      OBVIOUSLY

      NO.

      BUT, EVERYONE IS A BIG MAN. I NEED MY MASSIVE, LOGIC DOESNT APPLY, 5/4 THS BIGGER THAN 1990 PIG UP TRUCK.

      GAS TAX NOW !!!!! $2 a gallon sounds about right. (raise it gradually over 3 years.)

      but it ll never happen. I need my pig up truck. (insert cave man grunt)

    • 0 avatar
      Dan

      “The loser will be the atmosphere, as all these extra barrels get turned promptly into CO2.”

      Nothing short of civilization ending global catastrophe was going to keep those easily accessible barrels underground forever. The atmosphere doesn’t care if we burn them up today or in 2050.

      So who were we saving them for?

    • 0 avatar
      bd2

      Russia’s National Wealth Fund has around $125 Billion – which is enough to keep the economy floating for several years.

      Figure around an additional $25B having been siphoned off by Putin and his associates.

  • avatar
    pwrwrench

    Although not directly related to the present,I recall seeing signs at gasoline stations in the 1950s that had “GAS WAR” on them. I asked my dad if there was going to be shooting. He chuckled and told me they were competing over the price. The posted price was about $1 US in present day money.
    What followed was about two decades of relatively stable and low oil prices. Until the mid 1970s. This correlated with M. King Hubbert’s theory of peak USA production. Which, thirty years later, turned out to be a dip with new techniques boosting production and reviving depleted fields.
    What comes next is unknown.

  • avatar
    Hummer

    I still haven’t seen any price drops, still at $1.99 here.

    • 0 avatar
      JMII

      Funny how that works. When something causes the price to go up (here in FL its the “H” word during the summer) the local station reacts immediately, almost in real time. But when the price drops the reaction is so much slower.

    • 0 avatar
      Lie2me

      $1.90 here in southern Wisconsin. I can’t even remember when it’s been this low, years

      • 0 avatar
        highdesertcat

        It’s going lower. It has gone lower daily here in El Paso, TX, the lower part of NM, and the eastern part of AZ.

        With Mexican Peso crashing yesterday, the refined gasoline America pipes in from PEMEX is so cheap, the refineries in this area will fill their holding tanks to capacity within a couple of days.

        Talk about a gas glut. Great for the customer, but there is more refined gas now that we can use, and the airline industry had cut back its purchases of Jet Fuel drastically.

        • 0 avatar
          bd2

          There always have been more gasoline than we could use – which is why (before the allowance of oil as an export), refined fuels was the #1 US export (which was a way to prop up gas prices here).

          • 0 avatar
            -Nate

            “There always have been more gasoline than we could use – which is why (before the allowance of oil as an export), refined fuels was the #1 US export (which was a way to prop up gas prices here).”

            Fuel prices were regulated too , they (not the liberals) de regulated them and guess what ? .

            -Nate

    • 0 avatar
      dal20402

      Still $3.65 at my local station, but others in the area have dropped 30 cents in the last couple days, so I expect they will follow suit. The lowest in the greater Seattle area (all outside of the city) just fell below $3.

      For the record, the difference between the Washington and North Carolina gas taxes is 14.5 cents.

      • 0 avatar
        highdesertcat

        In your area I understand that taxes on each gallon of gas is as high, if not higher than CA.

        14.5 cents difference, but what are the taxes?

        • 0 avatar
          dal20402

          Not so.

          NC: 34.4 cents
          WA: 49.9 cents
          CA: 61.2 cents

          A sales tax on gasoline in CA adds about another 7 cents.

          The super-high prices on the West Coast are mostly because of distribution bottlenecks that restrict supply, not taxes.

          • 0 avatar
            highdesertcat

            Interesting, since I found the difference in gas prices between Quartszite, AZ, and Blythe, CA to be more than $1.50 lower in AZ.

            So the comical part for SoCal, like the borderland between San Diego and Winterhaven, is that many residents of CA hop across the border into Old Mexico, gas up for ~$1/gal. Ditto with Ciudad Juarez and El Paso, or Nogales, AZ, and Nogales, Old Mexico.

            A lot of people who work in America, throughout the borderland, actually reside in Old Mexico, just across the border of there they work in America.

            Many do so because they cannot afford to live in America, and that actually includes American citizens who live just across the border in Old Mexico.

            All to avoid taxes.

          • 0 avatar
            MrIcky

            I understand part of the CA price is that they require special blends, and those blends are different regionally within the state. Also, CA has several refineries that were all shut down. So since there neighbors don’t get the same fuel, they have to ship it in. They actually load up tanker ships in LA and TX and go through the Panama Canal to get fuel to CA. So ya, bottlenecks, but that doesn’t feel descriptive enough.

          • 0 avatar
            jkross22

            “The super-high prices on the West Coast are mostly because of distribution bottlenecks that restrict supply, not taxes.”

            Summer and Winter blend gas in CA also contributes to our higher prices. The tax on a gallon of gas out here is absurd, especially in light of our road/bridge conditions and that all of those dollars aren’t going to infrastructure repair.

          • 0 avatar
            dal20402

            Meanwhile, for a dose of reality: the fuel tax in Autobahn Paradise Germany is $2.88/gal for petrol and $2.08/gal for diesel. And that’s before VAT.

            California does not have high gas taxes.

          • 0 avatar
            krhodes1

            Those taxes are a sad joke. Should be more like $3-4/gallon. Then we could have decent infrastructure, AND incentivize people to actually think before they drive, and think about what they drive.

            But heh, GM is putting a 400+hp V8 in a cargo van!

          • 0 avatar
            bd2

            Seemingly every-time gas gets too low in California and the Midwest/Chicago, one of the refineries serving that area ends up having an accident/explosion, putting a crimp on supply and raising the price of gas.

            Marathon’s refinery in Cal just had another “accident” last month.

          • 0 avatar
            Hummer

            I don’t know what corruption is entangling your local(State) government but N.C. has very good roads and makes do with a very middle of the road fuel tax.

            Only a moron would support giving the government more taxes than they need.

          • 0 avatar
            jkross22

            People saying taxes aren’t high enough in CA aren’t paying attention. Here in LA, one half of our city council is under an FBI investigation for bribes, extortion and other assorted pay to play crimes. CalPERS, the state’s public pension and the largest public pension in the country is awash in corruption. HSR, our version of the Big Dig, just a lot more expensive, has zero accountability and has told contractors and employees to ‘shut up’ about legit criticisms of the $120 billion boondoggle.

            Google is your friend.

          • 0 avatar
            bd2

            @Hummer

            There are states which contribute a lot more to the Federal coffers than they get back and then there are states which suck from the teat of the Fed govt.

          • 0 avatar
            Scoutdude

            The super high prices on the west coast is due to the high cost of doing business and the lack of competition in many areas in those states.

            Drive just 65 miles north of Seattle to Burlington and gas is $2.50 a gallon and has been in that range for at least the last month or so. It’s also $2.50 all over Spokane. A little farther to the north and it is $2.60 in Bellingham.

            Outside of the Seattle core, where many gas stations have been driven out due to the price of the land, but still in the Seattle city limits you can find regular for under $3.

          • 0 avatar
            bd2

            @ScoutDude

            The lack of competition that more affects gas prices in the West Coast is that the market is controlled by 3 large refineries.

            So whenever there’s an “accident” at one, prices sky-rocket as there is no spare production capacity to meed demand.

            The Midwest market (Chicago and surrounding areas) is also beholden to huge spikes in prices due to refinery accidents due to a stranglehold by a few large refiners.

    • 0 avatar
      dukeisduke

      I paid $1.749 for regular (with the 5-cent member discount) at Sams Club yesterday.

  • avatar
    Arthur Dailey

    “Better for you bank account”.

    I use on average $45 per week of gas. If prices decrease by 25% that saves me $11.25 per week.

    If I heated my home with oil then perhaps I might be more excited, but then the heating season is nearly over (even here in Canada). and crude prices will probably stabilize before next winter.

    Meanwhile as we have seen in other ‘petroleum production price wars’, the retail price of gasoline does not reflect the actual reduction in the price per barrel for crude. The retailers merely increase their profit margins.

    And when this occurs Canadian and American oil field workers suffer layoffs. Stock markets go into full ‘panic mode’.

    Yep, a real ‘boon’ for us.

    • 0 avatar
      Tele Vision

      @ Arthur Daily

      I switched locations in my company last year and immediately began saving CDN$400/month in gasoline costs when gas was at $1.40/L and more. My daily ( no pun ) round-trip is now 20 Kms instead of 100 Kms. The suddenly cheap gas around here, like the $0.839/L for regular and $102.90/L for premium at Costco, has had two effects: A) I’m actually saving LESS money for the same wear and mileage on my car and truck; and B) I’m driving like a clot because gas is nearly free. Good times.

  • avatar
    Carrera

    Dropped to under 2.00/gal at the big clubs in Central Florida. Still, lots of retailers at 2.25 for some weird reason.

    • 0 avatar
      redgolf

      $1.95 at Shell, Smyrna, Tn. – $1.89 across the street at Circle K, 5-10 cents cheaper at the Shell when I use my Shell app, our local Publix grocery store every 2-3 weeks has a “save $10 off gas when you buy $50 or over worth of groceries”! So, right now 5 gallons of free gas, what a deal!

  • avatar
    SCE to AUX

    “OPEC Infighting and Coronavirus Ads Up to Affordable Gas”

    “Adds”, not “Ads”

  • avatar
    R Henry

    I hope Dodge dealers are well stocked with Challenger and Charger R/Ts…great time to promote them!

  • avatar
    -Nate

    Still waiting for any serious drop in pricing in So. Cal. .

    Nothing under $3.4X / gallon .

    I wonder if COSTCO and SAMS CLUB (same company) are any good ? .

    -Nate

    • 0 avatar
      Hummer

      “ I wonder if COSTCO and SAMS CLUB (same company) are any good ? .”

      Wait what? I’m under the understanding that COSTCO is owned by Kroger and Sams Club is owned by Walmart.

      • 0 avatar
        dal20402

        Costco is certainly not owned by Kroger. It’s an independent company headquartered in a suburb of Seattle, and is quite a bit bigger than Kroger by any measure you care to use. (end local business bragging)

        Sam’s Club is indeed owned by Walmart.

        • 0 avatar
          Hummer

          Isn’t Kirkland a brand of both Costco and Kroger?

          • 0 avatar
            dal20402

            It’s a Costco-owned brand; it was named after the suburb of Seattle where the original Costco headquarters was located. I don’t know if they sell products to Kroger. I haven’t seen any in local Kroger stores, but Kroger is different everywhere.

            Costco has since moved to Issaquah, another Seattle suburb, but “Issaquah Signature” doesn’t exactly have the same ring to it.

          • 0 avatar
            FreedMike

            I shop at Kroger (called King Soopers here in Denver) and I’ve never seen any Kirkland products there.

          • 0 avatar
            JimZ

            Kroger’s in-house brand is “Private Selection.”

          • 0 avatar
            Hummer

            Oh well what the hell.

            In my defense I’ve been to Kroger probably once in the past 5 years I couldn’t tell you the closest one. Costco on the other hand I have become a habitual shopper over the past year.

    • 0 avatar
      mtunofun

      Costco and Sam’s Club is priced the same, but Costco gas is Top Tier and Sam’s is not. I try to use Costco whenever I can.

  • avatar
    vvk

    Great time to increase fuel taxes!

  • avatar
    mcs

    @posky: “Russia and U.S. shale producers are in a better position to weather the storm”

    Maybe the russians, but not the US producers:

    https://oilprice.com/Energy/Oil-Prices/US-Shale-Collapse-Will-Lead-To-Higher-Oil-Prices.html

  • avatar
    Vulpine

    Saudi itself did the same thing several years back and pretty much for the same reason–an attempt to bankrupt the shale oil business. It almost worked, too. The problem is that they essentially ran themselves low on reserves while the shale oil drillers merged with the big producers, keeping the shale business alive and if anything, even more productive once oil prices started going up again.

    As such, I agree with hdc that this new attempt won’t last very long. Depending on Russia’s reserves, I would guess at one- to two years maximum which might help fill Russia’s budgetary coffers a bit but in the long run will cost them more than if they’d followed OPEC’s recommendations.

  • avatar
    Jeff S

    Since I work at home 4 days a week and 1 day a week I take the Park & Ride which is 3 miles away (Park & Ride fare is paid by my employer) the price of gas is not that important to me. My wife and I are going out a lot less because of the coronavirus. I wouldn’t mind a fuel tax increase if the amount of increase went directly for repair and replacement of roads and bridges otherwise it is just another source of revenue to be wasted by politicians and bureaucrats.

  • avatar
    MrIcky

    @ several people- When teetering on the edge of a global recession, raising taxes on anything is not a good idea (maybe vanity facemasks is an exception).

    • 0 avatar
      -Nate

      There you go :

      Using common sense, logic and worst of all , _FACTS_ .

      Now get the hell offa my lawn ! .

      -Nate

    • 0 avatar
      jkross22

      Yep. As Craig from AutoGuide used to say, “You’re as entitled to your own opinion as you are to be wrong.”

    • 0 avatar
      bd2

      Which is why taxes should have been raised (and not cut, again) when the economy was growing.

      That’s what the govt. should do to build up a reserve (or in the case of the US, cut the Federal deficit) and during times of economic downturn (esp. due to malfeasance by the banking/financial sector) spend to try to “jump-start” the economy.

      Put our politicians/leaders don’t have the back-bone to do that.

      • 0 avatar
        Hummer

        Raising taxes and trying to build the economy up are at odds with one another. A better plan is to cut spending, cut out all foreign support, get us out of wars, get abusers off social programs- etc.

        • 0 avatar
          bd2

          When the economy us going strong, a modest tax increase shouldn’t have much of an impact.

          History has shown that tax cuts have NO real impact on the economy and in preventing economic downturns (if that were the case, the Bush tax cuts would have prevented the Great Recession).

          The top marginal tax rate was never higher than during the 1950s and yet the economy grew immensely w/ there being the biggest expansion of the middle class that the world has seen.

          This all happened at the same time as paying down the immense WWII debt and funding the GI Bill (paying for education, making housing affordable).

          The biggest driver of the economy has always been to grow the middle class (and not making the top 1% even wealthier).

          That’s why Henry Ford more than doubled the wages of his workers to $5, in the thinking that they (and those employed by other companies who would have to follow such a wage hike) would then be able to afford his automobiles.

          • 0 avatar
            -Nate

            @ bd2 :

            STOP ! .

            you’re using facts and reality again, the flag waving fake ‘conservatives’ hate and fear that .

            -Nate

  • avatar
    tonyd

    Perfect time to stick it to OPEC and Putin.
    1. $40 per barrel tariff on all imports not from western hemisphere.
    Keeps the frackers in business.
    2. $2 a gallon for the FF portion of fuel.
    Will promote higher ethanol and bio/renewable diesel blends that helps American farmers. No need to enforce blend quotas. If by magic everyone will be able/willing to run E30-B50.
    3. Pull all asserts devoted to protecting the Persian gulf out. Let China and SA pay that bill.

    • 0 avatar
      jack4x

      NO to ethanol mandates that ruin engines, cost MPG, and drive up the price of food.

      There is hardly an example of a more naked giveaway to a politically powerful group than ethanol mandates to farm states that are over represented in the Senate. In 2005, you could maybe say it made sense before the fracking boom. Now we are the world leader in oil production and devoting farmland to growing inefficient fuel is nonsense.

    • 0 avatar
      rpn453

      Hard to believe there could still be anybody out there who thinks ethanol fuel mandates are beneficial.

      • 0 avatar
        FreedMike

        Corn farmers certainly think they’re beneficial, and they have a legalized bribery operation – whoops, I meant to say lobby – which is why ethanol blended gas exists.

        • 0 avatar
          JimZ

          but billions of dollars a year in farm subsidies isn’t “socialism.”

          Q: What’s trashy when you’re poor but classy when you’re rich?

          A: Getting money from the government.

  • avatar
    namesakeone

    Gasoline prices are below $2.00 a gallon in Metro Detroit, for the first time in a long time. I’m surprised President Trump hasn’t yet (in a tweet) tried to take credit for that, as he has for pretty much everything that’s happened (except for those for which he tried to deflect blame).

  • avatar
    Jeff S

    No on anymore ethanol subsidies. Just what we need increase ethanol content and ruin the engines in our vehicles.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • dantes_inferno: FCA motto: Dodge testing. RAM into production.
  • Schurkey: A few years back, I treated myself to a Challenger 5.7 Hemi rental car for several days when vacationing on...
  • SCE to AUX: I was shocked to see an SSR in the wild the other day. The Hummer EV will do better, but I wouldn’t...
  • SCE to AUX: Yeah, I’ll bet the engineers didn’t think of that. Have you seen the armor plate under the...
  • CaddyDaddy: Ya, but when Dalton got to Missouri and the Roadhouse, the Riv was the one to go with for the Dirty Work.

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber