Fuel prices off to robust start.
Gasoline prices are starting 2017 at the highest levels since New Year’s Day 2014 thanks to a rally in oil prices in December fueled by OPEC and non-OPEC production cuts that are to take hold this month.
Retail gasoline prices started January 1, 2017 at $2.3359 per gallon representing a 33 cents increase from the first day of 2016. This year appears to be more than likely to be a more expensive year for retail gasoline prices as crude oil solidifies itself above the $50 per barrel level and takes refined products along for the ride.
Pledges by OPEC producers at the end of November kick started an oil futures rally that took prices decidedly above the $50 barrel level and with some extra production cuts chipped in from non-OPEC producers expectations are for the global oil markets to see supply and demand balanced. There is some debate as to when the balance happens; some would argue it’s already started. There is still a huge supply glut of oil that needs to be worked through for the market to achieve higher prices.
While the market rallied on production cuts, any real data to support the cuts will not be available until next month. There is also concern about production cheaters and potential growth from OPEC members Libya and Nigeria that have had recent issues which dragged production lower in those two countries over the past couple of years.
The final numbers for EIA gasoline demand will not be available until the end of February, but for all intents and purposes 2016 will be a record year for demand. The one caveat though is that earlier in the year many analysts expected demand to run away with the record, however after several monthly revisions downward it will be much closer at the finish line. Nevertheless 2016 may represent a peak for gasoline demand in the U.S. as prices move higher and vehicles become more efficient many analysts expect a leveling off of demand this year.