Oil Prices Keep Dropping Amid Economic Fears — Could It Last Through the Holidays and Beyond?

Santa Claus at gas station. stock photo
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Oil prices dipped to their lowest point of the year this week despite the recent announcement by OPEC and its allies to keep cutting supplies as fears of a global recession outweigh supply constraints. Prices of both oil and gas could keep tumbling into the new year and beyond amid a plunge in demand.

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The price of U.S. oil dipped by 3.5% to a low of $74.25 a barrel on Tuesday, Dec. 6, CNN reported — it’s cheapest point since Dec. 23, 2021. Prices are down by more than 40% since hitting a high of just more than $130 a barrel in March, not long after Russia’s invasion of Ukraine.

Prices of Brent crude, the global benchmark, declined 4% to about $79.50 a barrel on Tuesday. Brent crude continued to trade below $80 early Wednesday, according to OilPrice.com.

Meanwhile, gasoline prices continued their months-long slide, dropping to a national average of $3.355 a gallon as of Dec. 7, according to AAA. Prices at the pump are down by 4% over the past week and 12% over the past month. They have plunged by roughly one-third since hitting an all-time high of $5.016 a gallon in mid-June.

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The ongoing oil selloff is probably not happy news for OPEC+, which announced on Sunday that it would continue to cut supplies by 2 million barrels a day to firm up prices. That announcement maintains a policy set in October and is expected to continue through the end of 2023.

A day later, the European Union imposed a ban on seaborne oil imports from Russia, CNN noted, while Western countries put a $60 cap on Russian oil. Both of the moves aim to impair Russia’s ability to finance its war in Ukraine.

It’s too early to gauge the longer-term impact of OPEC’s move on oil and gas prices, though experts expect short-term prices to remain deflated.

“Gas prices are dropping sharply and are only a nickel more per gallon than a year ago,” AAA spokesperson Andrew Gross said in a Monday, Dec. 5, press release. “But with oil being the main ingredient in gasoline, OPEC+’s move could slow this decline. However, the gas price will likely soon be lower than it was a year ago.” 

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As previously reported by GOBankingRates, prices for other types of fuel were expected to tick higher this winter even before OPEC’s decision. The U.S. Energy Information Administration estimates that natural gas spot prices at the U.S. benchmark Henry Hub will average $6.09 per million British thermal units (MMBtu) this winter, which would be the highest real price (adjusted for inflation) since the winter of 2009-10.

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A separate EIA report projected that residential propane prices will rise to an average of about $3 a gallon by March 2023 from about $2.67 in late November. Residential heating oil prices are expected to remain flat at an average of about $5 a gallon.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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