GAITHERSBURG, Md. -- With Labor Day approaching, gasoline prices have suddenly perked up. Many Americans preparing to hit the road for the last summer holiday will likely be quick to react to the jump, quipping how the rise is election-related or due to the holiday. The jump is no conspiracy, however, and has everything to do with spicy comments from OPEC about cutting oil output.
I'm surprised the oil market still pays attention to OPEC, given that even as an oil minister talks about cutting oil output, the country (Venezuela) has been busy ramping up output, according to the IEA (International Energy Agency). Iran, too, appears to have raised output during the summer months, and Iraq is churning out increases in supply as well.
This lends support to the argument that whatever talk OPEC throws at the market, it may all be hot air. OPEC members have been kings of talking the talk all year long, but they have failed to walk that walk. With oil prices recovering, OPEC has nothing to lose by suggesting the market will balance, but as the summer fades, there are signs they should be concerned.
After the summer road trips are over, the cars parked and the kids back at school, oil and gasoline consumption will suffer. The bears will return to the market as oil inventories remain well supplied and production cuts fail to materialize.
And unlike the Chicago Bears, these oil market bears may have quite a performance in store. Just wait until mid-September: The bears will likely really put pressure on gasoline prices, especially as strict RVP (Reid vapor pressure) requirements fade away and winter gasoline begins flowing again.
What's it all mean for motorists? Until Labor Day, we're likely to remain strapped in on the Raptor (Cedar Point's 1994 hit roller coaster) with some upside and some downside. The national average will likely bounce around in the $2.10 area. But once we climb and peak the first hill (signaling the end of summer driving season), we'll see a nice downward move. A bit later in mid-September, we'll see the downslide accelerate.
Patrick DeHaan is senior petroleum analyst for GasBuddy. Reach him at pdehaan@gasbuddy.com.
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