By on April 12, 2020

Looking for an added dose of bad news, recently laid-off, pandemic-sheltering readers? Gas prices should be heading northward before long, now that Russia and OPEC member countries have reached a pact to curtail oil production, thus inflating the near-worthless value of a barrel of crude.

That means prices at the pumps won’t be quite as enjoyable in the coming weeks. Maybe it’s time to brave the outside world tonight and fill up that tank — and any other safe, sealable vessel you can get your hands on.

Sunday afternoon, the leaders of OPEC nations and other oil-producing countries, among them Russia, the U.S., Saudi Arabia, and Mexico, agreed to reduce production by 9.7 million barrels a day. That’s 10 percent of the world’s oil supply — as CNBC reports, the largest production cut in history.

Vastly reduced oil demand spurred by the ongoing coronavirus pandemic coincided with geopolitical jousting between Russia and Saudi Arabia last month, leading to continued excessive production at a time when consumers needed it the least. That sent the value of a barrel of crude plummeting to the lowest point in years. For the average citizen, it was the only positive thing to emerge from the grim month of March. The glut of oil won’t disappear overnight, nor will the pact between the 23 nations, called OPEC+, see the change go into effect in short order.

The near 10-million-per-day barrel reduction commences May 1st, lasting two months before an 8-million-barrel-per-day cut goes into effect until the end of the year. After that, 6 million barrels is the name of the game. That cut will last from January 1st, 2021 to April, 2022. The glut won’t be gone for a long time, but oil futures will surely rise on word of the pact. The signs outside your local gas stations will reflect the optimism (read: price inflation) that comes from a stabilized outlook.

The agreement could have seen signatures late last week, but Mexico stood firm on its initial refusal to cut production by 400,000 barrels per day. Under the new agreement, the country south of the Rio Grande will instead taper off by 100,00 barrels per day. Referring to Mexico’s pared-down contribution, President Donald Trump was quoted by CNBC as saying the U.S. would “pick up some of the slack.” U.S. oil production is already in decline.

Besides the near 10-million barrel cut, some nations have agreed to reduce their output beyond what’s in the agreement, potentially putting the actual oil cut somewhere between 15 and 20 million fewer barrels per day in May and June. Right now, Canada, whose crude fell below 4 dollars a barrel in recent weeks, hasn’t yet committed to a drop in production, as it’s not a federal matter.

Despite the historic deal, not every analyst feels that the number of barrels shed is enough, given what’s going on in the background. That said, no one disagrees that the move will help stabilize markets and keep oil producers afloat.

For the average consumer, and that group includes this writer, it may be time to get off their ass and make that long-avoided trip to the pumps. Sunday night is always a good time to fill up for cheap(er), anyway.

[Image: Nithid Memanee/Shutterstock]

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69 Comments on “Get Yer Jerry Cans Out...”


  • avatar

    US is the net oil exporter: 25% of US oil is exported to other countries.

  • avatar
    gasser

    World oil production 100 M bbl/ day. Current demand down 35% to about 65M bbl/day. Agreement will cut production from 100M to 90 M bbl/day (less cheating). Big problem with matching production to lagging demand. Plus the pipeline and storage facilities are FULL. I don’t see a sudden spike in gas prices in the next few months. I doubt June 1 will see a huge resurgence in U.S. gasoline demand.

    • 0 avatar

      Agree with Gasser. All the “low cost” crude that is already here has to dwindle before the higher priced stuff arrives. All the fuel refined from the lower cost stuff will remain at the current – or close to current – price at the pumps. It won’t be until the higher priced crude makes it to the refineries that there will be the move upward in pricing. Of course, those with lower integrity can – and may – take advantage of the consumer. I don’t expect the demand to bounce back all that fast. Prices may indeed stay lower for longer than what is predicted. But, I also predicted back at the first of March that the number of deaths from COVID19 was going to be around the 55 to 60K mark for the US – so what do I know!?

      • 0 avatar
        Scoutdude

        That is not how it works, at least for companies that stay in business long term. You have to value your current inventory based on replacement cost or you will see serious erosion of your working capital as prices increase.

        Say you purchased 10,000 gal of gas when it cost you $1/gal and now you learn that your shipment due next week will cost you $1.10/gal. Now you’ve already sold 5,000 of those gallons based on that $1/gal cost and banked $5,000 to replace it and meanwhile you’ve spent your profit margin on paying wages, electricity, rent and maybe some to yourself so that you can pay your electricity, rent or mortgage and other expenses.

        So if you keep selling gas at the same price you’ll have $10k for more inventory but you’ll have to come up with another $1k out of pocket to get another 10,000 gallons, or you can only buy 9,090 gallons. Of course in today’s world of significantly reduced demand you probably don’t want to buy 10,000 gallons, but either way you are in a hole. So to prevent digging yourself deeper you must raise your prices when you know the replacement inventory is going to cost you more. Even if you set aside that extra $.10 for the second 5,000 gallons you sell you are still down $500.

        This rings true all the way up the supply line, through the jobber and to the refinery.

        At the retail level you get screwed on the way down too, because that guy across the street might get his “new cheaper gas” on Mon and you aren’t due until Thur. If you don’t meet or at least come close to your competition’s price you won’t move the rest of your fuel and have room for that delivery on Thur. More importantly you’ve lost sales you make a real margin on, the in-store items, that you don’t sell unless you get them in the store because they are buying gas.

  • avatar
    CKNSLS Sierra SLT

    So now the United States is a quasi-member of OPEC. You know-the same organization that had us “over a barrel” (pun intended) in the 70’s.

    • 0 avatar
      SaulTigh

      Yeah, it stinks, but so would having the entire US shale industry go bankrupt because other producers are state controlled.

      I filled up my pickup yesterday for $1.35, and if I recall the previous fill up was for around $2.09. Big gas tank and working from home made that possible. I won’t mind too much if it goes back up 50 cents a gallon.

      • 0 avatar
        ScarecrowRepair

        US gasoline prices and oil prices have been down before, and if shale wells are shut down for a while, it’s no big deal.

        You (and Trump and other government functionaries) only see the lost jobs. Everyone else benefits from the lower prices.

        People only have so many dollars to spend. The more they spend on oil, travel and related products and services, the less they spend elsewhere. The same number of people will be unemployed from the same number of dollars not being spent on their particular products.

    • 0 avatar
      ttacgreg

      I for one am reveling in the topsy-turvy ironies as of late. On some levels it is just plain amusing. My favorite is people (like a life long friend of mine) in the anti-abortion camp saying that we should just let the COVID victims die, and taking steps to “flatten the curve” should not be done. “Pro life” indeed!

      • 0 avatar
        Art Vandelay

        I’ll take stuff that never happened for 200 please Alex.

      • 0 avatar
        Vulpine

        Hear! Hear! My wife says the same thing, TTACgreg. “Pro Life Indeed!”

        • 0 avatar
          Art Vandelay

          I mean one could counter with “Hey, you are cool killing a fetus but we have to shut down the entire planet to save mostly a bunch of oldsters”.

          Incidentally, I don’t have any friends from either side of the aisle that are that extreme one way or another. Perhaps you two just hang out with good old fashioned idiots.

          • 0 avatar
            Lou_BC

            It is an unfortunate belief for many that COVID-19 only kills the old or those with “preexisting conditions”. One can argue that the flu does the same and one can argue that heart attacks are more likely to kill people if they have “preexisting conditions”.

            There shouldn’t be much need for abortion since the real problem is unwanted pregnancies. You fix that issue with universally free access to birth control measures and even fund counselling efforts by both the secular realm and the spiritual realm. Another way to reduce birth rates is to improve living standards for the poor.

          • 0 avatar
            Art Vandelay

            Take your common sense elsewhere @Lou. This is the Internet.

            And yeah, as a 44 year old with much ware on my lungs from Iraq and other crap holes, I’m keenly aware that it is not good for anyone.

          • 0 avatar
            Lou_BC

            “Take your common sense elsewhere @Lou. This is the Internet.”

            Yes. The Internet, a vast wasteland of misinformation and disinformation.

          • 0 avatar
            Arthur Dailey

            Do others find it incongruous that it is often the strongest supporters of abortion are the most stridently anti-capital punishment? And vice versa.

          • 0 avatar
            JimZ

            “Do others find it incongruous that it is often the strongest supporters of abortion are the most stridently anti-capital punishment?”

            because it’s not about “life,” nor is it about giving a rip about children (else they wouldn’t have sat on their hands after Sandy Hook.) it’s strictly about keeping women under control.

          • 0 avatar
            Vulpine

            @JimZ: Thumbs up on that one.

  • avatar
    -Nate

    Funny how the supply and demand thing worked out for American after gasoline was deregulated….

    We export refined gasoline now, cheaper than it’s sold anywhere in the U.s.A. yet some still think de regulation is a good thing .

    -Nate

    • 0 avatar
      ScarecrowRepair

      When was gasoline regulated?

      Why is it a good thing to regulate it?

      What exactly do you mean by “regulation”?

      • 0 avatar
        -Nate

        Gasoline prices were regulated until the 1970’s when the fake fuel crises was created by the large petro companies to force their prices up wards .

        during this manufactred fuel crises you could go to the harbor and see fully loaded oil tankers stretched to the horizon, just waiting to be unloaded and refined, the refineries sat almost idle until they got their way and guess what ? .

        just like everything else the 1% ever got deregulated, the prices shot _up_ never down .

        Those who endlessly yammer ‘supply and demand’ are either ignorant or shills .

        Facts do matter .

        The price of gasoline shoots up the *instant* the price of a barrel of crude jump by .05 cents, long before this crude is out of the ground .

        then of course, crude drops to $20 / barrel and we’re still paying too much .

        I’m invested in oil companies because I might as well flesh out my grand daughters inheritance whilst they’re bleeding me dry at the pump .

        Glad to hear some are getting sub $2 / gallon fuel, we sure aren’t .

        The bullshit posted about the toilet paper delivery chain is pure bullshit ~ no one needs a year’s supply .

        I’m in a house with three adults and three children, we’re not using any more TP than usual and neither is anyone else .

        -Nate

    • 0 avatar
      Jeff Weimer

      We’ve always been able to export refined petroleum, it was crude oil itself we were barred federally until a few years ago – an artifact of the early 70s gas shocks.

      https://money.cnn.com/2016/01/29/investing/us-oil-exports-begin/index.html

      Chances are, that refined gasoline sold overseas is cheaper at that sale because it is sold 1) wholesale, and 2) sold without state taxes applied. The average of state tax is nearly $.30/gal. I don’t know if federal tax is applied at that point of sale or not. It’s $.184/gal.

      https://www.eia.gov/tools/faqs/faq.php?id=10&t=10

    • 0 avatar
      Jeff Weimer

      I’m also curious about what you mean by regulation of gasoline. Is it price controls like we had in the 70s? Because *that* was a primary contributor to the 70s gas shortages, lines, odd/even days, gallon limits, station closures, etc. that we saw back then.

      • 0 avatar
        mcs

        Crude oil exports were banned starting in 1975. Here’s some background information on the subject: https://www.ipaa.org/oil-exports/

      • 0 avatar
        ttacgreg

        A few weeks back when I went to the grocery store and it was cleaned out, lots of bare shelves, I got this weird deja vu feeling . . . . oh yeah! panic buying!. Lines at the gas stations in ’73. Denver, oddly had their gas shortage a year earlier than the rest of the country for some reason who knows why In ’74 when the rest of the country was suffering big lines and shortages, Denver had no problem. It’s almost like we were guinea pigs.

        I read an article back then that said that a big factor in the shortage was due to the fact that people were afraid to run their tanks down close to empty. There was considerable volume of gas being stored in the nation’s vehicle fleet gas tanks. LOL and to this day I still practice that habit I formed back then. I never let the tank get below 1/4.

        • 0 avatar
          PeriSoft

          “A few weeks back when I went to the grocery store and it was cleaned out, lots of bare shelves, I got this weird deja vu feeling . . . . oh yeah! panic buying!”

          Some of this isn’t panic buying but a reflection of highly-refined supply chains operating with very low margins. For example, the whole toilet paper thing – well, people started staying at home vs. going to work, being in airports, at public events, and so on. So they’re using a lot more *consumer* toilet paper and a lot less *commercial* toilet paper, and they have different supply chains. Commercial demand drops by 10%; consumer demand rises by 10%, but the consumer TP supply chain operates on near-zero margins and has very little excess capacity. So we get shortages.

          You have the same thing in other areas. The whole food supply chain is very tightly strung, and again, you have less commercial usage (via Sysco, cafeterias, big chain restaurants, etc) and more private usage. So it’s really easy for these things to get messed up, and very hard to bring on additional capacity without massive expense, especially when the equipment can’t necessarily be produced, ordered, delivered, or supported in the middle of other shutdowns.

          So sometimes what looks like, oh, people are being crazy, turns out to be knock-on effects of what are normally very efficient supply chains that stretch and break in black swan situations.

          • 0 avatar
            CKNSLS Sierra SLT

            Perisoft-
            I read the same article you are quoting the information from and that article is flawed on many levels.
            Here are a few ways-
            1) School children are home in the summer and toilet paper shelfs are not bare in the summertime. Mom and/or dad don’t contribute to the massive shortage-with one or two extra people home.
            2) In March there were two days where toilet paper demand was up over 800%-yes 800 per-cent.
            3) When I was at Costco it just so happened they got in 5,000 cases of toilet paper-EVERY BASKET had a case in it. People (here) are hoarding TP in their basement
            4) so now-we have truck drivers-who can drive as many hours as they want (the DOT regulations-have been put on hold) delivering TP due to hoarding.

          • 0 avatar
            Lou_BC

            I’d say that it is a combination of panic buying and tight supply lines with minimal inventory.

            I know my household is using more TP and more of some food items because both my sons are now home all of the time.

        • 0 avatar
          Lou_BC

          @ttacgreg – in the winter I tend to keep my fuel tank as full as possible. It is a safety issue and it reduces condensation in the tank. Recently we went from a very warm spell to cold weather in a few days time and the fuel sending unit froze on my truck. A fuel tank a gas and methyl hydrate along with slightly warmer weather corrected the issue.

          • 0 avatar
            ttacgreg

            Interesting angle on keeping the tank topped. I do consider the empty space in a gas tank as an opportunity for water vapor to condense.
            I’d love to know (just generally) where you are in BC. I wonder if I live in a colder climate than yours. It is currently -12c and snowing outside here in Colorado’s snow belt. I do suspect you experience higher winter humidity than I do here.

          • 0 avatar
            Lou_BC

            @ttacgreg – North central BC. I’m on the confluence of 2 rivers. Humidity isn’t usually an issue but with climate change we get unusual warm spells in the winter. We’ve hit -40C this winter. I had the sending unit freeze after a week warm spell of +10C weather then it dropped to -15C for a week.

        • 0 avatar
          DownUnder2014

          I have the same habit too. 1/4 is basically the lowest I allow it to go as well before I go and fill up.

  • avatar
    ScarecrowRepair

    Cartels never last long; members always look for secret side deals. OPEC is a typical leaky cartel, and last I heard, US oil output is not controlled by the government.

    This cutback won’t last.

  • avatar
    redgolf

    And the push for EV’s continues! O’boy!

  • avatar
    Vulpine

    Just goes to prove what I said when that Russian/Saudi price war started… It simply couldn’t last. I wouldn’t be in the least surprised if, when drivers get back to their normal habits, oil prices–and gas prices, will spike at potentially record highs.

  • avatar
    eggsalad

    Moot to me. I last bought gas on 3/5, and at my current rate of consumption, probably won’t need to fill the tank until June or July.

  • avatar
    ToolGuy

    Coincidentally, I fired up the truck a couple of days ago and filled my gas cans (more than several in various sizes, 2-cycle oil added to some and fuel stabilizer added to all) for the mowers and power equipment.

    I promise you the “jerry can” term was running through my head as it was again reinforced that there is a direct relationship between the age of my gas cans and their effectiveness/ease of use – i.e., the new ones are terrible.

    (After dealing with an automotive EVAP system recently, I think I have connected the dots on why the newer gas cans are so bad.)

    If my shed burns, it’s my loss because I have more petroleum products out there than my homeowner’s insurance allows. If it burns because an EPA-compliant (unvented) gas can swells up in August and leaks accelerant all over the wood floor, well that’s just stupid.

  • avatar
    SCE to AUX

    Does hoarding a few gallons of gasoline to save a few bucks really make a difference in someone’s budget?

    Besides, all that gasoline sitting around loses octane points over time, so you’d better buy premium.

  • avatar
    Lie2me

    “I would like to thank and congratulate President Putin of Russia”

    Yeah, what a sweetheart :(

    A week ago our President Stable Genius was taking credit for the wonderfully low gas prices he brought to the American people until the heads of the oil companies had to remind him that those low prices were destroying the oil industry and thousands of oil-related jobs

    Oops!

  • avatar
    Jeff S

    Not a good idea to hoard gasoline especially with ethanol in it. Even with stabilizer gasoline with ethanol will go bad and will damage your outdoor equipment. I started to buy ethanol free gas for my lawn equipment because of the damage caused by the ethanol especially after the gas had been in my gas cans for a couple of months. As for driving I don’t use enough gas to make a huge difference if the price goes up. As many I am driving even less during this time and the amount of gas that I use for maintaining my yard is not enough. I would rather just pay more for the ethanol free gas than rebuild another carburetor on my riding mower.

  • avatar
    Zipster

    That’s not a fair comment! Fake news!

  • avatar
    Zipster

    Is that the best defense of your Great Guide that you can mount?

    • 0 avatar
      Art Vandelay

      Not defending anyone. Just pointing out your little mutual admiration society…aka…a circle jerk. I have my beefs with the dude and will address them come November.

      Of course $#!+heads like you know all, so whatever I guess.

      And as one who taught High School…no, you are incorrect.

      • 0 avatar
        Lie2me

        If it was Hilary you guys would already have her head on a platter. In fact, let’s talk about the emails again to divert attention away from the man behind the curtain who “inherited this mess” and is “not responsible, not at all”

        Do I have the playbook right?

        • 0 avatar
          Art Vandelay

          What do you mean, “You Guys?” Yes, if it was Hillary and it had been handled in this manner to this point, I would be equally upset. There is no playbook for normal people who look at the options every 4 years and try to make the least bad decision. This year is shaping up to be another real winner BTW. It must suck to have so much faith tied up in politicians. I’ll just bet on myself, thank you.

  • avatar
    Zipster

    Having taught high school (consumer’s math?), perhaps you have a need to perceive yourself as superior to any high school student. Approximately half of a typical high school student body would test out higher than him, and before they left high school, a large percentage would be more socially mature and emotionally more stable.

    • 0 avatar
      Art Vandelay

      No, it was British Lit and I only did it for a year because it was the one stupid point in my life when I wanted to make a difference. Alas I feel I make a bigger difference simply maximizing my income and spreading some of it to worthy causes.

      I have no need to perceive myself higher than anyone. But keep on assuming. The fact that you see high school students as mature is funny though. There is a reason that things like Alcohol, Being Drafted, and Smoking are reserved for people past high school age. They are not mature, as developmental science will tell you.

      You people’s rage is sad. I hope you find something that brings you some joy.

      • 0 avatar
        ttacgreg

        Speaking of developmental science, Psychology Today recently had an article that pointed out that the POTUS’s behavior patterns fit very nicely into the Piaget’s pre operative stage of childhood cognitive development. That puts him in the 2-7 year old category. I reviewed a few synopsis of Piaget’s theory today, not retaining much from two separate college courses I had that addressed his writings. There really are some clear resonances, and it reduces some of my puzzlement concering his behavior patterns.

  • avatar
    Zipster

    I did not claim that all high school students are mature, but there is no question that a large percentage are more mature than him and capable of managing alcohol, tobacco and military service. Notably your Great Guide apparently avoided all of these, does that establish maturity? You did not address his very obvious intellectual deficits. Are you conceding this?
    Because he is a psychopath, it is more difficult to compare him with normal people, but his conduct provides more than ample evidence that what I have said is irrefutable .

    • 0 avatar
      Art Vandelay

      Why do you assume that people are so polarized on him as you? Great Guide? Get over yourself. Did I vote for him? Sure. Did I plan on it again? Not Likely. He was the least bad choice at the time IMHO.

      Again, there is this whole mess of rational people out there that look at a given choice and try to make the least bad decision. Their days aren’t ruled by some seething hatred of somebody else. I am not a big Biden fan, but he seems to be the least bad option at this point, yet again. Still, I wouldn’t paint his supporters into a ridiculous box. I am sorry that so much of your own identity seems to be tied up with attempting to squeeze internet strangers into some box based on your perception of their beliefs.

    • 0 avatar
      Art Vandelay

      “Most objective people know high school students who could do much better discharging the duties of office and with considerably more dignity to the office as well.”

      “I did not claim that all high school students are mature…”

      See your original statement…you kind of did dude.

      • 0 avatar
        Arthur Dailey

        Art, I am liking your postings.

        Yes HRC was a terrible choice for the Democrats. Far too much baggage.

        You should have moved to Canada to teach. You could have accomplished both of your goals. An income just under 6 figures, great benefits, and once you reached the 85 factor (age and length of service, but now being increased to 90), you would be eligible for a lifetime pension of 60% of your earnings, adjusted annually for inflation.

        That should allow you to make a difference and build a nice nest egg. It is very good to be a public sector worker in Canada.

        • 0 avatar
          Art Vandelay

          I did manage a pension, though I certainly would have preferred to.earn it in the manner you describe @Arthur.

          It is just maddening. I’d really like to vote “for” somebody rather than “against the other guy” in my adult life. Sadly the choices get worse every few years and their loon supporters get more behind them.

          Maybe one day I’d come North lol. My debt with Uncle Sam is square I think.

          • 0 avatar
            Lou_BC

            “I’d really like to vote “for” somebody rather than “against the other guy” in my adult life.”

            I have to agree. There have been several times in my life where I voted someone *out* as opposed to voting someone *in*.

      • 0 avatar
        Zipster

        Art, as a former teacher of British literature your reading skills are a little rusty. Read that sentence about “knowing high school students” again. It does not state or imply all high school students.

        In closing I will say that I agree with you about the relationship between being anti-abortion and pro death penalty. Perhaps they believe that being anti-abortion absolves them from violating the commandment not to kill.

  • avatar
    dal20402

    If I fill up my Highlander now, and then drive so little that I’m still using the same tank of gas three months from now, is that hoarding?

  • avatar
    Jeff S

    No hoarding is when you have plastic gas cans full of gas and you keep buying plastic gas cans and filling them up with more gas. A full tank the same gas after a a couple of months in your vehicle is a sign that you have nowhere to go.

  • avatar
    jthorner

    I’m confused. If US companies talk to each other and make a deal to increase prices, that is illegal collusion under anti-trust laws. How then can a US President make a deal with other countries to raise the price of something everyone uses? I don’t get it. (No, this concern isn’t specific to the current President).

  • avatar
    Jeff S

    The President cannot make a deal with other countries to raise the price of a commodity, but a President can ask for cooperation in either reducing or increasing the supply of a commodity but that is not a deal. I doubt the President actually ask for a deal to decrease oil supply.

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