TAMPA, Fla. -- A major shift occurred in the oil markets last week, suggesting gas prices could soon plummet. Oil prices tumbled to 6-week lows, due to an unexpected record-high build in domestic crude oil inventories. The crude oil forecast has now gone from an imminent $55-$60 a barrel range, to $40 a barrel or below - the same level as we saw last winter, when gas prices were less than $2 a gallon.
Also impacting crude oil prices are lowering expectations that OPEC will agree on a production freeze, in effort to reduce global oversupply. OPEC still has until November 30th to develop a framework, but major oil producing countries like Iraq, Iran, and Russia have shown no interest in cutting production. The price of crude settled at $44.07 on Friday, but a lot could happen in the next few weeks. Prices in the low-40s, could make it more compelling for Saudi Arabia and others to carve out some sort of agreement. Sometime between now and the November 30 meeting, some promises could be made in hopes of stabilizing oil. If not, oil prices could fall below $40 a barrel. Gas prices should move lower this month, but may not get as low as last winter until the November 30 meeting is finalized.
"Wholesale gasoline prices fell at an incredible rate last week, dropping 20 cents in the Gulf Coast market," said Mark Jenkins, spokesman, AAA - The Auto Club Group. "Motorists in Florida will likely see pump prices drop a dime or more in the next week or two. Motorists in Georgia and Tennessee should expect similar declines, but it could take a little longer due to the Colonial Pipeline outage."
Colonial Pipeline’s Line 1 Returned to Service Sunday Morning
After shutting down due to an explosion on Monday night, Colonial Pipeline restarted Line 1 at 5:45 a.m. CST. Subsequent to Sunday's successful restart, it is expected to take several days for the fuel delivery supply chain to return to normal. This map of the Colonial system reflects how re-supply will arrive at different markets.
Motorists will notice uneven prices in the next week or so. Popular name-brand gasolines may not move much at all, but prices for non-branded gasoline could be 5-10 cents higher. These inflated prices may remain for the next 8-10 days, but should not prevail much longer than that.
Since the outage, state averages rose 8 cents in Georgia and 3 cents in Tennessee, but leveled-off over the weekend. The pipeline outage had no effect on gas prices in Florida, because the state is primarily supplied by waterborne shipments from Gulf Coast refineries.