This week saw a rise in gasoline, natural gas, and crude oil prices. This trend has been ongoing almost weekly since June 2020, when there was an excess of product and lower prices.
The U.S. had 540 million barrels of oil at the end of summer, excluding oil from the Strategic Petroleum Reserve. This was a new record. Oil prices were between $10 and $15, while retail gasoline was about $2 per gallon.
The Energy Information Administration (EIA), which reported Wednesday that oil inventories had fallen to 410million barrels, a 24% drop since June 2020 when oil prices rose to $89 and the US average price for a gallon was $3.538.
EIA stated that commercial inventories fell to the lowest levels since mid 2014 and raised its forecast for Brent crude oil by 11%, to an average of $90 a barrel in February.
EIA reported that January spot prices for natural gas averaged $4.38 per MMBtu at the U.S. benchmark Henry Hub, an increase of 16% from December prices. Natural gas demand increased due to cold weather in the Northeastern and Midwest.
The global demand for natural gas is strong and EIA predicts that U.S. liquefied Natural Gas (LNG) exports will increase by 16% in 2022 compared to 2021 levels.
EIA predicts that natural gas prices will rise by $4.70/MMBtu in February and then increase to $3.80/MMBtu over the remaining three quarters.
In January, the average price of regular-grade gasoline was $3.31/gallon. This is almost a dollar more than one year ago due to higher oil prices. EIA predicts that gasoline prices will average $3.24/gallon in 2022, and drop below $3.00/gall in the last quarter.
AAA reported Wednesday that the average price of gasoline in the U.S. was $3.538, an increase by 4.6% since Jan. Texas had a $3.149 average price.
EIA Acting Administrator Steve Nalley stated that market concerns over oil production disruptions and supply chain vulnerabilities and uncertainties about how central banks might react to combat inflation contribute to a highly unpredictable environment in which oil and petroleum product prices are.
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Some forecasters predict $100 oil by the third-quarter.
Already, industry activity has increased and the Texas Petro Index reports that activity has increased by 28.8%.
World Oil magazine reported that exploration companies and production companies will increase capital spending by 40% this fiscal year, compared to 2021, in search of new oil or natural gas reserves.
The pandemic caused a drop in demand and petroleum production dropped from a record high 13 million barrels per daily to a record low of 13 million. U.S. oil production dropped to 11 million barrels per hour and has since recovered to 11.9 million barrels/day.
EIA predicts that the U.S. will produce oil at an all-time high of 12.6 million barrels per day in 2023. The supply will catch up to the demand, and prices will start to fall.
Alex Mills was the former president of Texas Alliance of Energy Producers.
