Before the worldwide COVID virus pandemic hit in early 2020, retail gasoline prices were already relatively low compared to the prior four years. But once the historically unique economic impact of the virus sank in, the cost of a gallon of fuel dropped by about 50 percent for most consumers. Plus, that entire and massive plunge in value took place within a four-week window of time. Necessity of the mother of invention, as the old saying goes. In this case, millions of individual investors started thinking about investment opportunities in oil, assuming COVID wouldn’t last forever and that per-gallon costs would eventually bounce back.
It’s important for every investor to understand the way the health crisis affect the fuel market, who some of the key players are, how the overall economic shutdown is continuing to change the world, and what at the pump prices are likely to do in the near future. The good news for people who wish to turn a crisis into an opportunity is that oil prices still have room to rise before they’re back at pre-crisis levels. Anyone who wants to know how to buy crude oil should consider such diverse methods as ETFs (exchange-traded funds), corporate stocks, futures, options, and CFDs (contracts for difference).
The COVID Effect on Recent Prices
Why did a worldwide virus lead to a huge drop in the price of crude, and by extension, gasoline? The primary factor was economic shutdown, which took place in most developing and developed nations. With millions of people either not working or doing their jobs from home, there was a gigantic drop in the need for vehicle fuel, which meant an over-supply situation. Like a 1,000-pound boulder in a pond, the value of the world’s most preferred fossil fuel sank about 50 percent within a couple of weeks.
The Iran Effect
Political turmoil in producer nations can lead to unusual changes in the energy markets, as the recent Iranian situation clearly demonstrates. After the U.S. pulled out of a large international coalition and decided to impose trading sanctions on Iran, the market reacted quickly, anticipating a possible oil shortage if Iran decides to cut production in retaliation for the U.S. move. For at least 30 years, the volatile leadership in Iran has wreaked havoc on the worldwide energy markets, which is one reason investors always keep a close eye on that nation’s financial news.
OPEC+ and Russia
There has been a recent change at the top of the global energy-producing hierarchy. For decades, Saudi Arabia, as the leading member of OPEC (the Organization of Petroleum Exporting Countries), was in near-total control of international supply. However, OPEC is now only number three in a trio of the globe’s top petroleum producers, which includes the U.S. at the top and Russia in the second spot. But investors should remember that OPEC still has a lot of power because its members act in unison, while U.S. and Russian producers do not.
The Economic Shutdown
In the second half of 2019, the per-barrel cost of crude petroleum sat at about the $55 mark. Now that the virus effect is slowing, that $55 level is still about $12 above the current $43 cost. That’s good news for anyone who still wants to take part in what could be a rise back to the normal, or at least pre-crisis values.
Prices at the Gas Pump
For consumers who worry about their monthly transportation budgets, there is an upside and a downside. As the national and world economies rebound and employment numbers get back to financially healthy levels, the price of petrol at the pump is also going back to its 2019 averages, slowly but surely.
For Investors to Consider
Before heading to your favorite trading platform to place orders for fuel-based CFDs, futures, and industry stock shares, consider some key facts about recent price activity and industry behavior, including the following:
Since 2014, the price, in U.S. dollars, of a barrel of crude oil dropped from $104 to $30.
The huge fall in per-barrel values were only partly due to COVID-related factors.
The new trio of top producers, the U.S., Russia, and OPEC are the predominant influencers behind global production and supply.
When the world economy is doing well, per-barrel prices usually go up due to increased industrial demand.
Natural disasters like hurricanes, floods, and earthquakes can have profound temporary effects on the industry.
At-the-pump costs for consumers are affected by at least a half-dozen factors, including retail demand, inflation, supplies, economic headlines in producing countries, and political turmoil. That makes it difficult to predict future market behavior.
In an effort to protect the state’s dwindling fuel reserves, New Jersey Governor Chris Christie has issued an order restricting motorists in 12 northern counties to buying gas every other day.
Chris Christie says he wants to ease long lines and extended wait times at gas stations and prevent a fuel shortage in the state hard-hit by Superstorm Sandy. Some gas stations closed because of a lack of electricity or gasoline, causing those open to be overburdened with customers.
Prices at the pump have remained steady despite the shortages, AAA said, averaging just below $4 a gallon in New York City, 2 cents lower than last week. However, on Long Island, where only a third of all stations were working, average gasoline prices jumped 5 cents from a day earlier.
But online, Craigslist users started offering gasoline for as much as $15 a gallon to motorists and homeowners not wishing to brave the lines.
It was also revealed that a third day of gasoline “panic buying” among storm-stricken New York area motorists prompted authorities on Friday to tap strategic oil reserves and waive shipping regulations even as limited deliveries resumed in the battered region.
The U.S. government said it will loan 2 million gallons of diesel from the Northeast emergency heating oil reserve to the military for recovery efforts, and waived rules barring foreign-flagged vessels from carrying fuel between U.S. ports in a bid to boost supplies.
Drivers with license plates ending in an even number will be able to buy gas on even-numbered days, and those with plates ending in an odd number can make gas purchases on odd-numbered days.
A Gov. Chris Christie spokesman tells the Star-Ledger newspaper in Newark that there currently are no restrictions on filling gas containers.
New Jersey Gov Chris Christie has issued an order restricting motorists in 12 northern counties to buying gas every other day
Chris Christie’s order comes as President Barack Obama announced buying 22 million gallons of gas to help get residents of some of the areas worst affected by Hurricane Sandy back on the road.
The administration has purchased up to 12 million gallons of unleaded fuel and up to 10 million gallons of diesel fuel that will be distributed in New York and New Jersey to supplement private sector efforts.
Gov. Andrew Cuomo announced Saturday that another 28 million gallons of fuel will be delivered over the next few days.
The Department of Defense will also set up mobile fuel stations around the New York metro area to distribute gasoline, offering only 10 gallons per-person but free of charge.
The Federal Emergency Management Agency (FEMA) said on Friday that the President had directed the Defense Logistics Agency to handle the purchase of the fuel.
It will be transported by tanker trucks and distributed throughout the two states and other communities impacted by the storm.
FEMA Administrator Craig Fugate said the fuel purchase is part of efforts by governments, private organizations and others to help the region recover from the Superstorm, which left residents queuing at gas stations for a diminishing supply of fuel.
This purchase is in addition to an emergency diesel fuel loan from the Energy Department’s Northeast Home Heating Oil Reserve.
Large parts of the tri-state area were left without power for five days after the storm struck and fuel shortages have become even more dire, prompting some opportunist convenience store owners to charge as much as $6 a gallon.
Becoming ever more desperate for fuel, residents have been bickering over their place in the queue at gas stations and even brandishing firearms to get what they need.
Along the New Jersey turnpike cars have lined up for miles in the hope of getting fuel, but gas stations in many outer-borough areas are sealed off with yellow tape.
As New York Governor Andrew Cuomo promises that fuel-starved areas will be getting relief and “people will see it quickly”, these motorists want gas and they want answers.
Earl Lucas, 72, had seen something like it before – in the Seventies when, he said, there was “a real gas shortage”.
He added: “People are angry because the gas is there they just can’t get it. Do you know how to get it? Can you use your influence to get some?
“There were five trucks came in here from a Catholic charity and they got straight through and filled up. Some people can get it.”
A source from the Coast Guard told DNAInfo that two million barrels of petrol were being unloaded in surrounding ports, and tankers are heading into New York Harbor.
US consumers are facing higher gasoline prices at the pump as wholesalers sell crude oil onto them at rising prices, Lundberg Survey has said.
The Lundberg Survey said the national average price of self-serve, regular gas was $3.51 on July 27, up from $3.41 on June July 13.
The survey of 2,500 gas stations, that comes out every other or every third week, indicated that the rise was the first in the last 14 weeks.
Gasoline prices fell over 14% from a recent peak of $3.967 a gallon set on April 6 before rising last week. The record high is $4.112 set on July 11, 2008.
Trilby Lundberg, who conducts the survey, in an interview said the rise was because crude stopped falling and wholesalers began passing the higher price onto the consumer, something that was not seen in the early part of the month.
US consumers are facing higher gasoline prices at the pump as wholesalers sell crude oil onto them at rising prices
The price of crude, which Lundberg said “dictates more than any other factor what happens to gas prices”, settled Friday at $90.13 per barrel. That price had been as high as $110.55 as recently as March 1.
U.S. benchmark West Texas Intermediate ended the week higher after data showing a slower U.S. growth rate could open the door for more monetary easing when the Federal Reserve meets on Tuesday.
Gasoline prices have fluctuated greatly during the turbulent economic climate that has presided since 2008.
According to The Week, from 2002 -2008, the average price of regular gas went from $1.06 to $4.11 before dropping again in 2009. Since 2009, meanwhile, prices have more than doubled.
The devastating recession saw millions thrown out of work and demand for gasoline fall. Prices lowered for a time in 2009 before rising again.
The reason for this is the ever-changing market cycles of supply and demand around the world.
Crude oil prices are set on the world market and gasoline prices have been rising since 2000.
According to fuelfix.com, increased production of crude oil would change the expectations of oil speculators. This would, in turn, lower crude oil prices and gasoline prices.
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