Oil prices dipped to their lowest point of the year this week despite the recent announcement by OPEC and its allies to keep cutting supplies as fears of a global recession outweigh supply constraints. Prices of both oil and gas could keep tumbling into the new year and beyond amid a plunge in demand.

                By                    Vance Cariaga

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The price of U.S. oil dipped by 3.5% to a low of $74.25 a barrel on Tuesday, Dec. 6, CNN reported — it’s cheapest point since Dec. 23, 2021. Prices are down by more than 40% since hitting a high of just more than $130 a barrel in March, not long after Russia’s invasion of Ukraine.

Prices of Brent crude, the global benchmark, declined 4% to about $79.50 a barrel on Tuesday. Brent crude continued to trade below $80 early Wednesday, according to OilPrice.com.

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Meanwhile, gasoline prices continued their months-long slide, dropping to a national average of $3.355 a gallon as of Dec. 7, according to AAA. Prices at the pump are down by 4% over the past week and 12% over the past month. They have plunged by roughly one-third since hitting an all-time high of $5.016 a gallon in mid-June.

The ongoing oil selloff is probably not happy news for OPEC+, which announced on Sunday that it would continue to cut supplies by 2 million barrels a day to firm up prices. That announcement maintains a policy set in October and is expected to continue through the end of 2023.

A day later, the European Union imposed a ban on seaborne oil imports from Russia, CNN noted, while Western countries put a $60 cap on Russian oil. Both of the moves aim to impair Russia’s ability to finance its war in Ukraine.

It’s too early to gauge the longer-term impact of OPEC’s move on oil and gas prices, though experts expect short-term prices to remain deflated.

“Gas prices are dropping sharply and are only a nickel more per gallon than a year ago,” AAA spokesperson Andrew Gross said in a Monday, Dec. 5, press release. “But with oil being the main ingredient in gasoline, OPEC+’s move could slow this decline. However, the gas price will likely soon be lower than it was a year ago.” 

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A separate EIA report projected that residential propane prices will rise to an average of about $3 a gallon by March 2023 from about $2.67 in late November. Residential heating oil prices are expected to remain flat at an average of about $5 a gallon.

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