As of Tuesday, oil prices were falling one day after their biggest single-day jump in years due to the weekend attack on a key Saudi Arabia energy facility, Aramco. But Florida drivers could soon see gas prices move higher.
U.S. oil fell nearly five percent per barrel, after rising more than 14% on Monday in the wake of the attack — which led to the biggest disruption of crude oil in modern history. Mark Jenkins is with AAA South in Tampa.
“The U.S. remains pretty well supplied with oil, although it does still rely on imports from other countries,” said Jenkins. “Anytime you have a significant increase in the cost for crude, then the price for refining into gasoline is that much more expensive. Typically, a $1 increase for crude oil leaps to about a two and a half cent increase in prices at the pump.”
But at this point, there’s nothing set in concrete. Jenkins says it’s a fluid situation that ignited quickly, and could flame out just as quickly, depending on market response over the next few days.
Oil plunges more than 6% in London after a report that Saudi Arabia is close to restoring 70% of the oil production lost after this weekend’s attack https://t.co/heSJuy5Azl pic.twitter.com/PehpRcrvx6
— Bloomberg (@business) September 17, 2019
“I think Saudi Arabia is trying to assess the situation; how long it’s going to take before they return to some sense of normalcy,” Jenkins said. “Until that time, the market will continue to respond to different reports about how this shortage would be offset by Saudi Arabia potentially dipping into their reserves, or other countries increasing their output.”
President Trump has authorized the release of oil from the Strategic Petroleum Reserve, if needed, to keep the markets well-supplied. An exact quantity has yet to be determined.
“I think that ultimately, we’re still seeing a pretty significant jump in oil prices, regardless of that news,” said Jenkins. “At least in the short term it looks like drivers are going to be paying the price at the pump. We’re going to see higher gas prices across the board throughout the country.”
“We’re in a fungible commodity business; and you take oil off anywhere in the world and it affects the rest of the world,” said Harold Hamm, CEO of oil producer Continental Resources. Appearing on CNBC, he said — in his view — tapping into the reserve is not necessary.
“There’s a lot of commercial storage in the world; some four billion barrels,” Hamm said. “A lot of it is right here in [the U.S.], right here in Cushing, Oklahoma [where] we’ve got 39 million barrels. And a lot of storage could be pulled forward to take care of the supply situation.”
As of Tuesday the most expensive gas in Florida was found in Panama City at $2.53 per gallon for regular; the cheapest was in Jacksonville at $2.36. The national average was $2.59, up three cents from Monday.
“Right now we’re looking at a potential of about a 10-25 cent increase in gas prices,” said AAA’s Mark Jenkins. “It’s going to be different throughout the United States in terms of how quickly we see increases. Some areas you might see overnight; some might be more gradual – just a few cents per day.”
But there is some good news – while there are higher prices at the pump, availability will remain good.
“This is more of an impact on prices as a whole; but the Gulf Coast will continue pumping out fuel as they normally do,” Jenkins said. “We’re still about 40 cents lower than the highest price we’ve seen earlier this year. So, even if gas prices jump about 25 cents, we’ll stay well below highest price that we saw earlier this year.”
Meanwhile Reuters is reporting that Aramco — the world’s second-largest oil producer — would resume normal production within two to three weeks. Saudi sources briefed on the matter say the firm already had restored nearly 70% of its lost production.