Gas Prices Expected to Remain Low This Summer

With Memorial Day and the start of the summer driving season, Purdue University energy economist Wally Tyner believes reduced demand and higher inventories will help keep the brakes on oil prices.

“This week, OPEC agreed to extend their production cuts through March of 2018,” said Tyner, James & Lois Ackerman professor of Agricultural Economics. “However, all their production cuts have done so far is keep crude oil prices from falling. The big reason the cuts have had little impact on crude oil prices is that U.S. shale oil production has been growing rapidly. In fact, US shale oil production has grown 600,000 barrels per day since the OPEC cuts were first announced.”

By the end of this year, it is likely that U.S. shale oil production will have grown 1.2 million barrels per day, Tyner said, equaling the total cut by OPEC – the Organization of Petroleum Exporting Countries.

“In other words, by propping up the crude oil price at around $50 per barrel, OPEC has provided incentives for increased investment and drilling by U.S. producers,” said Tyner. “Shale oil production costs have fallen by about 30 percent over the past three years, making it profitable to produce in many fields at $50 per barrel. This dynamic is the major driver of keeping summer prices this year near where they have been recently.”

In addition, two other factors come into play, he said:

  • Demand is lower this year than last year because, even though consumers are driving more, they are driving more fuel efficient cars and the reduced demand puts downward pressure on prices.
  • Inventories of both crude oil and gasoline are above their five-year average, which tends to depress prices.

The U.S. Department of Energy projects gasoline prices to average $2.39 per gallon this summer nationally. Prices in the Midwest tend to be a bit lower than the national average, according to Tyner.

“We can expect prices this summer generally to range between $2.10 and $2.50 per gallon. Prices this summer will be a bit higher than last summer but the second lowest since 2009.”

Source: Purdue University 

Recent News

Fall-applied Herbicides-What Goes Around Comes Around

Fall herbicide treatments have fallen off over the past several years for a couple of reasons, among them the effectiveness of new soybean trait systems for managing marestail, some generally crappy weather in late fall, and efforts to reduce input costs.  We are seeing a resurgence in some weeds, such as dandelion, which respond well […]

New Round of Farm Aid for COVID Losses Announced, and Causes Snag in Congressional Spending Bill

Andrew Restuccia and Jesse Newman reported in Friday’s Wall Street Journal that, “President Trump unveiled $13 billion in new aid to farmers facing economic harm from the coronavirus pandemic as he aimed to boost support among rural voters at a campaign rally. ‘I’m proud to announce that I’m doing even more to support Wisconsin farmers,’ said Mr. Trump, speaking outside […]

Corn Silage Needs Adequate Moisture to Ferment

Early season frost is challenging for corn silage producers, according to Karl Hoppe, Extension livestock systems specialist at NDSU’s Carrington Research Extension Center. Frost makes an abrupt end to the corn-growing season. This begins the dry-down period for the corn plants. “Good corn silage fermentation requires adequate moisture to reduce dry-matter loss and spoilage,” Hoppe […]

Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now