OPEC Infighting and Coronavirus Concerns Cause Oil Prices to Plummet

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Crude oil dropped below $30/barrel on Sunday for the first time since 2016

BOISE – (March 9, 2020) – With global crude oil prices already reeling from decreased demand due to the spread of coronavirus, the Organization of the Petroleum Exporting Countries (OPEC) and other major crude producers failed to agree on additional production cuts at recent meetings, prompting Saudi Arabia to retaliate by slashing prices.  The combination sent shockwaves through the market over the weekend, forcing the West Texas Intermediate benchmark below $30/barrel for the first time since 2016.  Crude oil prices generally impact 50 percent of the price of gasoline.

“Concerns surrounding coronavirus have really taken their toll – both the travel industry and Chinese manufacturing have been especially hard-hit, driving down the demand for crude oil on a global scale,” says AAA Idaho Public Affairs Director Matthew Conde.  “The recent geopolitical tensions between Saudi Arabia and Russia might signal the start of a crude oil price war, which could apply further downward pressure on oil prices and eventually affect U.S. production.  As fuel demand increases heading into the spring, prices could be pretty turbulent in the weeks ahead, particularly if Saudi Arabia’s actions don’t bring its partners back to the negotiating table.”

At the close of Friday’s formal trading session, the WTI decreased by $4.62 to settle at $41.28/bbl.  But when the global markets opened on Sunday evening, Saudi Arabia’s move to cut prices pushed the benchmark as low as $29/bbl.  Currently, crude oil is trading near $34/bbl, which is 16 dollars less than a month ago and 22 dollars less than a year ago.

Today, the U.S. average price for regular gas is $2.38, which is six cents less than a month ago and nine cents less than a year ago.  The Idaho average price is $2.56, the same as a month ago but 21 cents more than a year ago.  Idaho and Utah are two of just three states that had higher pump prices last week.  National and regional stocks continue to drop as demand increases.

Idaho currently ranks 10th in the nation for most expensive fuel, but that’s actually a bit of good news – Idaho usually ranks somewhere in the 7th to 9th-place range.  All of the states in the Rockies region have more expensive year-over-year gas prices.

“A lot of levers could be thrown in the coming days, with gasoline demand increasing and available stocks dropping, refineries going off-line to complete seasonal maintenance, and the switch to summer-blend fuel,” Conde explained.  “All of that upward pressure will be put up against the market’s perceived overabundance of crude oil.  We’ll be keeping a close eye on how these market forces could impact the cost of operating a motor vehicle, particularly as people begin making their spring and summer road trip plans.”

 

AAA’s travel advice

Currently, the United States recommends travelers avoid all nonessential travel to China, Iran, South Korea and Italy.  Traveling anywhere else requires travelers to make informed decisions based on all available facts.

The U.S. State Department and CDC now recommend that U.S. citizens, particularly those with underlying health conditions, should not travel by cruise ship.  At this time, this is a recommendation only – the decision to travel by ship remains a personal one.  Cruise lines have adopted additional policies to help prevent the spread of sickness.

Travelers who have already booked a trip or cruise who have any concerns about their ability to travel safely should speak with a professional travel agent to determine the appropriate next steps.

 

Here are some additional travel tips:

  • The decision to travel is a very personal one that must be made by the individual.  People who opt to travel should make sure they bring along all necessary travel documentation, including health insurance cards
  • Pack an alcohol-based hand sanitizer with at least 60 percent alcohol content, and disinfecting wipes
  • Pack extra supplies, including medications, in the event that your return trip is delayed
  • Know the nearest location of and contact information for the U.S. embassy or consulate.  Also, enroll in the State Department’s Smart Traveler Enrollment Program (STEP), so you can be reached if conditions change while abroad
  • If you have concerns about traveling abroad, speak to a professional travel agent about exciting domestic and regional travel options
  • To promote everyday health, wash your hands frequently.  Avoid contact with sick people, and avoid touching your eyes, nose and mouth.  Stay home when you are sick, and frequently clean and disinfect objects and surfaces using a regular household cleaning spray or wipe.

 

“AAA is working very hard to stay on top of these dynamic situations and share the information with our members and the general public,” Conde said.