In recent news, there has been much talk about OPEC and how they are falling short of output. However, recent talks last Friday brought relief for industry analysts across the world as OPEC agreed to up output by one million barrels per day.
Who are OPEC and what does this mean?
OPEC is the Organization of Petroleum Exporting Countries, a collective of the biggest oil exporting countries, including major players like Iran, Saudi Arabia as well as smaller countries like Angola and Gabon. This international cartel controls most of the world’s reserves of crude oil, and therefore any decisions by them are felt by petrol retailers across the globe.
This announcement comes 18 months after OPEC slowed oil production to help reduce the glut they created by flooding the market back at the beginning of 2017. While it seems that target wasn’t properly met, production was at 158% at some points, OPEC has now agreed to target 100% compliance, meaning an increase of approximately one millions barrels per day (bpd) in the second half of 2018.
Analysts not optimistic
However, leading industry analysts are not as positive about the agreement as Donald Trump is.
Joe McMonigle, an energy analyst at HedgeEye, said: “I suspect we will eventually get some calculations from Opec but [the] lack of details is bullish, not bearish for oil prices.” He, along with other industry analysts, predicted that the actual output would fall short of the OPEC agreement of 1m bpd, and be nearer to 800,000 bpd.
While any increase is a good increase, for the consumer it may be that the growth is not enough to stop the oil prices rocketing with a loss in production from countries like Venezuela.
Khalid al-Falih, the energy minister for Saudi Arabia, was hopeful about the increase and said “Saudi Arabia is unique. All of our spare capacity is available at short notice.” He also noted that prices wouldn’t be affected until the end of summer as it can take weeks for a price fall to be indicated by retailers.
Iran, however, is not as positive as their production is set to be hit by the latest US sanctions on them in the US move to politically and economically isolate Iran. The US have been threatening countries, companies and banks that handle Iranian oil with sanctions and penalties if they don’t stop handling Iranian oil, such as being frozen out of the US market. While most European countries have started to reduce their import from Iran, it seems that the US wants an all or nothing deal, something that will most probably not help the price of petrol over the coming months.
What does this mean for you?
As you’ve probably already seen the price of petrol is high at the moment, although it has fallen slightly recently. Hopefully, this increase in production means that the price of oil, and therefore petrol will decrease slightly in the coming weeks although this is not certain. OPEC production could merely offset the losses in production and future supply in South America, the Middle East and Africa, meaning that consumers will feel no actual change.
Prices at the pump are at an all-time high since November 2014 but with supermarkets such as Asda announcing two price cuts over the last few weeks it seems that some relief is likely for consumers at the pumps.
While the effects of the OPEC announcement may not be felt until it is too late, you may be able to get on by until then. By using a technique called hypermiling, you can make the most out of every penny you put in the fuel tank.
One way to hypermile is to drive at consistent speed. The most fuel economic speed is around 55 mph, and while this is not always possible, the faster you drive, and the quicker you accelerate causes you to waste fuel. Slowly accelerate out of junctions and build up speed gently rather than zooming away.
Driving to the conditions is also very important. At the moment the UK heatwave is causing roads to become slippier and councils are sending out the gritters to help combat the melting roads. Drive carefully, as you would on an icy road at the moment to prevent slipping. As the roads are slippier, you may notice that you go faster down hills and along roads, so use the gears carefully to stop you from using excess fuel.
In regards to the pump prices, there’s not much you can do unless you own an oil producing country! However, by using the PetrolPrices app you can see the fuel costs wherever you are at any given point!
Do you think that the price of petrol will go down? Will we ever see relief in the sky-high prices at the pumps? Let us know below