How High Will Gasoline Prices Go? Saudi Drone Strike Expected To Have Impact

Though gasoline prices are 20 cents lower than they were in July and 28 cents less than a year ago, that respite could be short-lived in the wake of the weekend’s drone strike against a Saudi oil facility, with some experts expecting the 5% hit to global supplies to send pump prices up as much as a quarter a gallon.

The attack sent futures soaring on commodities markets, up nearly 15%.

The Aramco facility at Abqaiq produced nearly 10 million barrels a day in August, the U.S. Energy Information Administration shows. The drone strike cut that capacity by more than half. Though Aramco said it hoped to restore some of that capacity by the end of the day, it gave no timetable for full recovery.

President Trump moved to stabilize prices, saying he would open the Strategic Petroleum Reserves if he had to. U.S. imports from Saudi Arabia are at their lowest level in a decade, EIA statistics show. In the first half of this year, the U.S. imported 18,000 barrels compared to 35,600 in the first half of 2017. Total domestic stocks stand at 228 million barrels.

But crude oil is a global commodity, so any major development is going to ripple through the market.

AAA said in a press release the current oil glut should mitigate any impact, reporting the average price of gasoline holding at an average $2.56 a gallon Monday.

“Americans can expect local pump prices to start to increase this week. The jump could end up being as much as a quarter per gallon throughout this month,” AAA spokeswoman Jeanette Casselano said. “Whether this is a short- or long-term trend will be determined by the price of crude oil prices and how quickly the facilities in Saudi Arabia can recover and get back online.”

Ed Moya of OANDA said he doesn’t expect the drone strike to have a lasting impact but the near-term impact will have a negative impact on the global economy and produce a 25-cent-a-gallon increase in gasoline prices in coming weeks.

If Saudi Arabia can’t get production back up in a timely fashion, travelers also could see airfares and cruise line fares soar.

Patrick DeHaan, head of petroleum analysis at GasBuddy, told USA Today he expects only a minor impact from the drone strike.