Some oil indexes recorded oil prices above $40 a barrel on Monday, setting a new high in 2016. The rally of oil prices comes after 12-year low prices of less than $30 per barrel. Just four years ago, a barrel of oil sold around $100 per barrel. But with higher oil prices, will consumer gas prices rally upwards as well?
The rising oil prices comes more from ideas than actual supply and demand. Russia and the Organization of the Petroleum Exporting Countries (OPEC), principally made up of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, began talks of freezing oil production and driving in the United States tends to increase with warmer weather.
OPEC nations are suffering from low prices, but without much else to export, they may find that this freeze on production cannot wait for prices to increase to their unofficial $50 per barrel target. Meanwhile, this rally in prices may bring other oil producers back into the market now that profit margins are higher.
Some analysts believe that the surplus of oil in still in storage in OPEC nations will hold this rally short-term as freeze in production may not decrease supply as much as oil producers hope.
Gas prices have risen along with oil prices, but to a lesser degree. Two-thirds of states saw prices rise at the pump over last week. Wisconsin’s neighbors, Minnesota and Iowa, are among the top states for gas price increase in the last week.
Part of the increase is attributed to decreasing stores of oil in the United States after producers slowed production following low oil prices. The slowed production decreased stored oil and that is translating into higher gas prices.
If crude oil continues to rally, gas prices will likely follow, as long as higher oil prices don’t create too much incentive for overproduction.
Crop prices (March 8)
Rio Creek Feed Mill – Algoma
|Commodity||Price (per bushel)||Basis|
|New-Crop Wheat (SRW)||$3.99||-0.70|
Fox River Valley Ethanol – Green Bay
Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).
Gas Price Averages
United States: $1.81
United States one year ago: $2.45
Wisconsin one year ago: $2.38
Northern Door: $1.90
Sturgeon Bay: $1.86
Gold: $1,268.10/troy ounce
Silver: $15.44/troy ounce
Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, Reuters