Washington – Gasoline prices have fallen about 75 cents in two months, but whether motorists will see further declines at the pump depends in part on whether the Organization of Petroleum Exporting Countries can agree to cut production.
Members of the oil cartel have been negotiating to cut the group’s output by 1 million barrels a day – a move that could drive up oil prices and reverse the trend at the pumps, but most oil traders and experts doubt OPEC can achieve more than half the proposed reduction.
A failure to cut output could keep supplies strong and oil and gas prices soft.
Pump prices – now at a national average of $2.27 a gallon for regular unleaded – already have fallen because of a slowdown in U.S. demand, a buildup in crude oil and gasoline inventories, the end of the summer driving season, a collapse in profit margins at oil refineries, and a $17-a-barrel drop in crude-oil prices since August.
“The supply was coming back, and I think consumers cut back on use,” said Philip Verleger, an oil consultant. “The question is how far down it goes.”
Though a half-dozen countries have talked about production cuts, highly populated countries such as Iran, Nigeria and Venezuela are already producing well below capacity and their old quota levels, facing pressure to produce more because of heavy domestic- spending demands. Kuwait has not cut production since 1998. Saudi Arabia is reluctant to play the role of sole swing producer and has already trimmed output.
“We do not expect any significant production cuts by OPEC at prices above $45 a barrel, the new target price,” Fadel Gheit, oil analyst at Oppenheimer & Co., said in a report to investors.
Oil markets seemed to agree. The price of crude oil on the New York Mercantile Exchange closed Monday at $59.96, up 20 cents.
Gasoline experts said there were some signs that prices were stabilizing. The pace of declines in the prices charged by wholesalers was slowing, and there were some tiny wholesale-price increases late last week in the Gulf of Mexico region, said Trilby Lundberg, editor of the Lundberg Survey.
Lundberg warned that the sharp drop in prices could spur a resumption of increases in U.S. gasoline consumption. She also said that the closure of refineries for maintenance, not unusual at this time of year, could lead to a decline in inventories.
