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Production on the Rise, Keeping Gas Prices Down

Demand is lower while production levels are up.

by on Dec.06, 2017

Gas prices continue to fall as demand drops during the winter driving season.

With the winter driving season fast approaching, the price of gasoline is continuing to drop, according to AAA.

At $2.48, the national gas price average is at its cheapest level since early November. More so, pump prices nationally have been steadily dropping during the last two weeks. Today’s gas price is three cents less than a week ago, four cents cheaper than one month ago and 30 cents more than a year ago, according to AAA.

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“Cheaper winter gas prices are being seen for the bulk of the country as gasoline demand hits the lowest mark since February,” said Jeanette Casselano, AAA spokesperson. “On the week, 90% of states saw their gas price average drop – some even by double digits.” 

Declining gas prices mirror the Energy Information Administration’s latest consumer gasoline demand report, showing a drop of 871,000 barrels per day on the week for a total demand number of 8.7 million barrels per day for the week ending Nov. 24.

(Transportation eclipses power generation as leading cause of pollutions. Click Here for the story.)

Gas prices continue to fall as demand drops and production is on the rise.

The EIA reported last week that U.S. crude production hit its highest point since April 2015 in September of this year. Moreover, according to Baker Hughes Inc., the active U.S. rig count grew by two last week, with rigs now standing at 749 – that is 272 more rigs than last year at this time.

The price per barrel of crude pushed higher last week and is likely to continue its climb following news on Nov. 30, from OPEC and some non-OPEC producers, led by Russia, that they have agreed to keep their production cuts in place through the end of December 2018.

(Click Here for more about falling gas prices during Thanksgiving holiday.)

Participants in the agreement will continue to reduce output by 1.8 million barrels per day (bpd) in order to drain the global glut of oil that has suppressed oil prices.

AAA noted the increased production and investment in drilling from producers outside of the production reduction agreement have slowed efforts to drain the global glut, which is why OPEC decided to extend its current agreement.

(To see why the average fuel economy of new vehicles is getting worse, Click Here.)

The news indicates that the U.S. is gaining export prowess through increased demand for exports, making up for losses in global supply due to OPEC’s agreement. As the U.S. moves toward exporting more oil and petroleum products than it imports, such as gasoline for the second year in a row, market observers may decide to pull back on optimistic expectations for the price per barrel of crude.

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One Response to “Production on the Rise, Keeping Gas Prices Down”

  1. JAE says:

    Petrol prices in my area actually increased this week; having been down to $2.26 on average as of last Friday (1-Dec). They’re now back to $2.59 for 87 octane, higher in the city and along I-55, I-94 and other express-ways.

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