Increase in OPEC’s quota to protect gasoline price abroad

According to reports, gasoline prices at the pump are projected to continue to decline through the end of 2007 and then begin their seasonal increase next spring, according to the August 7 Short-Term Energy Outlook issued by the Energy Information Administration (EIA).

There are speculations also that reserves in most non-OPEC countries will likely decline next year if OPEC is not prodded to increase quota.

The result of all these is the methodical arm-twisting of OPEC through Saudi Arabia to ensure the economies of the West and Europe are sustained.

The fact is that, there has never been anytime, prices of petrol and diesel ever reduced in Nigeria, no matter the season. But apparently, prices of petroleum products in the country are mostly determined by seasons abroad.

A look at the trend in America and other parts of Europe shows the difference in the management of resources and economy, compared with Nigeria.

As at August 6, retail motor gasoline prices has fallen by almost 40 cents per gallon from the spring peak of $3.22 per gallon on May 21, even as the price of West Texas Intermediate (WTI) crude oil has risen by over $9 per barrel (22 cents per gallon) over the same period, according to the Outlook. The exceptionally high refiner margins that were the result of numerous refinery problems earlier in the year have eased considerably, the EIA reported.

This summer’s motor gasoline consumption is projected to average 9.5 million bbl/d, up 1 percent from last summer’s average.

Total domestic petroleum consumption is projected to average 20.9 million bbl/d in 2007, up 1.3 percent from the 2006 average.

In 2008, consumption is projected to increase a further 1 percent, to an average of 21.1 million bbl/d.

In 2007, domestic crude oil production is projected to average 5.2 million bbl/d, up 0.7 percent from 2006 production levels. EIA’s projections assume a hurricane-related outage of about 12 million barrels for the Gulf of Mexico between now and the end of November. Domestic production is also projected to increase by 4.8 percent in 2008, averaging 5.4 million bbl/d. Contributing to the increases in output are the Atlantis deepwater platform, which is expected to come on-stream later this year, and the Thunderhorse platform, expected to come on-stream late in 2008.

Motor gasoline inventories during the first half of the summer (April-June) were tight and are expected to remain so during the rest of the season. At the end of July, total gasoline inventories were about 204 million barrels, 5 million barrels below the average of the previous five years.

The low gasoline inventory situation is expected to persist, with end-of-season (September 30) stocks at 198 million barrels, 6 million barrels below the previous 5-year average and 17 million barrels below last year.

Distillate inventories, which had held at relatively high levels since late 2005, quickly fell to the middle of the normal band in June.

Distillate stocks are projected to remain near the previous 5-year average through this winter.

Crude oil prices, which have been rising over the last two months, are expected to reach a peak monthly average price in August before starting to ease slightly.

In 2007, the RAC of crude oil is projected to be $64.86 per barrel compared to the $60.23 per barrel average in 2006.

The main reason for this increase, the tight world oil supply and demand balance, is expected to continue next year, with a projected average 2008 RAC price of $68.75 per barrel. WTI prices, having averaged $66.02 per barrel in 2006, are projected to average $67.61 per barrel in 2007 and $71.25 in 2008.

This summer’s average retail regular motor gasoline price is projected to be $2.95 per gallon, up 11 cents per gallon from last summer.

Despite the continuing low gasoline inventories, gasoline prices began to fall in the second half of July and are expected to continue to decline through the end of this year. Regular-grade gasoline prices are expected to average about $2.64 per gallon in December 2007, compared with an average monthly high of $3.15 in May 2007.

Retail heating oil prices are projected to average $2.85 per gallon during the coming heating season (October through March), compared to $2.48 last heating season. Rising crude oil prices and projections of lower distillate inventories going into the heating season, combined with the assumption of a colder winter than last year, are the reasons for the projected increase.

Among other highlights in the Aug. 7 Outlook:

The significant crude oil price increases of the last 2 months are the result of increasingly tighter world oil markets. In May, the refiner acquisition cost (RAC) for crude oil averaged $61.60 per barrel. By August, the average monthly RAC price is projected to be $73.50 per barrel.