United Arab Emirates push for more oil production; what it could mean for gas prices
Within a week Tarrant County drivers have seen about a 50-cent increase per gallon on gas prices, reaching an average of nearly a dollar more than a month ago.
Gas prices have risen nationally coinciding with President Joe Biden’s announcement Tuesday that the U.S. will ban Russian crude oil imports — the U.S. gets about 1.5% of its crude oil from Russia compared to the 43% it gets from Texas production.
Sanctions on Russia are not solely responsible for the higher prices: the primary driver of gasoline prices is the cost of crude oil (currently $125 a barrel), which is set globally based on supply and demand. Right now, global demand is greater than supply, causing a rise in prices.
On Wednesday, the United Arab Emirates Ambassador Yousef Al Otaiba announced the UAE’s desire for increased oil production. The UAE will also nudge the Organization of the Petroleum Exporting Countries, or OPEC, to consider higher production levels.
What is OPEC?
The Organization of the Petroleum Exporting Countries was founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela in 1960. According to OPEC, its mission is to coordinate and unify petroleum policies among its member countries, secure fair and stable prices for petroleum producers, and to provide an efficient, economic and regular supply of petroleum to consuming nations with a fair return on capital.
United Arab Emirates, which has had a friendly relationship with the U.S. for over 50 years, joined OPEC in 1967.
“The UAE has been a reliable and responsible supplier of energy to global markets for more than 50 years and believes that stability in energy markets is critical to the global economy,” Al Otaiba said in a statement Wednesday.
What will increased oil production mean for U.S. gas prices?
On Friday, the average price for unleaded gas in Fort Worth and Arlington made a slight shift down from Thursday’s average of $4.069 to $4.052, according to the American Automobile Association. The average cost of all other grades went up.
Representatives with AAA said market analysts attribute the spike in prices to global oil market uncertainty as to how big of an impact the loss of Russian crude will have. The cost of crude oil is around 50-60% of what drivers pay at the pump, according to AAA, and the fluctuation in price is expected to continue until the market can balance the loss of Russian energy.
“Gas prices are climbing at a weekly pace we’ve never seen before, breaking records that were set in 2008 across the state,” said AAA Texas spokesperson Daniel Armbruster. “Prices are anticipated to keep rising due to Russia’s invasion of Ukraine and the impact it’s causing on crude oil prices.”
Will gas prices continue to rise?
For gas prices to start declining, global oil supply will have to meet demand — increased domestic and international production could both contribute.
Karr Ingham, a petroleum economist with the Texas Alliance of Energy Producers, told the Star-Telegram that higher prices for crude oil and gasoline means markets are working to meet demand.
“Consumers should certainly understand that this is a marketplace at work trying to solve this problem for them by incentivizing additional supply as quickly as possible,” Ingham said.
More: Gas prices surpass $4 in Texas on Thursday, breaking another record, and keep rising
