The world has gotten used to relatively cheap gasoline again. After prices reached record highs in 2014, the high-price bubble was burst largely by a boom in American production that was enabled by hydraulic fracturing. The price of a barrel of crude plummeted from $100 to $30. The Organization of Petroleum Exporting Countries, OPEC, responded by cutting back oil production in partnership with Russia in an attempt to drive up the price.
The cartel’s efforts were aided by a collapse of the Venezuelan government, but most analysts agree that OPEC has returned to relevance by successfully helping to push a barrel of crude back up to $70. Pres. Trump took notice, and on April 20 he tweeted “Looks like OPEC is at it again...Oil prices are artificially Very High! No good and will not be accepted!”
High gas prices have been very bad for the U.S. economy in recent decades, but it is no longer that simple. States that are dependent on oil production were devastated by the price collapse in 2014, and have benefitted from OPEC’s efforts. Alaska’s largest newspaper, the Anchorage Daily News, celebrated the $70 price while experts in the state called it a “great place to be.”
Higher oil prices could help natural gas producing regions, but that is not certain. Historically, crude oil and natural gas prices have moved together, but that link has broken down in recent years. Oil prices are being influenced by OPEC and instability around the world, while natural gas is much harder to trade internationally so its price is determined largely within the United States. Cheap American natural gas is slowly building more demand by taking over more electricity generation and it is also being exported some, but it is difficult to imagine a natural gas price spike caused by international events.
Many analysts think the presumed steady price of natural gas is beneficial even to producers. Stable prices make it easier to plan ahead, and that is helping to drive continued growth in the gas fields of Ohio, Pennsylvania, and West Virginia. Contact Cimmaron Land if you are interested in exploring opportunities in the region.