This summer, oil prices remained over $100 a barrel. High gas prices affected tourism and drove headlines about how the government should intervene. As we near the end of 2022 and the start of 2023, prices have thankfully leveled with increased domestic oil production. The U.S. Energy Information Administration (EIA) reports that crude oil production rose to nearly 12 million bpd in August, which was the highest since the start of the pandemic.
Will Congress Pass a Windfall Tax?
In October 2022, President Biden called on oil companies to pass down their Russia-Ukraine war-era profits to consumers and estimated that move would save consumers approximately $.50 per gallon at the pump. He warned that if oil companies didn’t make the move on their own, in light of how high gas prices have been and how hard they’ve hit everyday people, then he’d work to impose higher taxes and restrictions. Experts think that’d be difficult for Congress to pass a tax penalty against major oil companies regardless of Republican or Democrat control.
While that move might be without precedent here, it’s already started in Europe. In the United Kingdom, Parliament passed a 25% windfall tax on companies producing oil in the British North Seas. The head of Exxon Mobil said the windfall tax would force prices higher and disincentivize oil companies from opening refineries, the current bottleneck in global oil production.
What to Expect in 2023
In their latest Short-Term Energy Outlook, the EIA puts estimates Brent crude oil will drop slightly to $95.33 a barrel and production will exceed 12 million bpd a day. If the agency’s forecast is accurate, that’s great news for consumers who will see gas prices drop to an average of $3.61 per gallon.
Complicating this issue however, the Organization of the Petroleum Exporting Countries and a select group of non-OPEC members defied pressures from the Biden administration. This October, they agreed to cut production by 2 million barrels a day in the hopes of keeping Brent crude oil prices high.
What to Expect in 2030
This fall, the International Energy Agency (IEA) released its updated forecast for oil demand by scenario from 2010 to 2030. It forecasts oil production to be approximately 103 million barrels per day in 2030 if international countries follow their currently stated energy policies. Should they shift gears and follow through on their announced energy policies, then oil production will drop to approximately 96 million barrels per day. In the rare event the global market shifts to pursuing full-on net zero energy policies, then oil production will slow to approximately 72 million barrels per day.
Don’t Get Surprised by Oil’s Boom and Bust Cycles. Follow Financial Fuel Services to Stay Prepared.
Oil markets are constantly fluctuating with prices hitting soaring highs and dropping to stress-inducing lows. There are so many factors to monitor: how big the current boom in domestic oil production is, how much OPEC+ countries are going to produce, and what’s going to happen with sanctions against Russia. The team at Financial Fuel Services aims to keep you informed. To schedule a consultation, please contact us today.