The world oil glut is pleasing motorists at the pump, but sticker shock could be on the horizon.
The International Energy Agency said Monday that a drop-off in drilling activity is reducing future oil stockpiles. The result will be higher prices next year and beyond because of supply-and-demand imbalances and the inability of idled rigs to restart quickly once the market turns up again.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant-future,” said Fatih Birol, the agency’s executive director.
Birol predicted oil will rise gradually to about $80 a barrel by 2020. Oil prices shot to more than $100 a barrel in mid-2014 before a long slide sent them crashing below $30 last month.
“There was a rise, there will be a fall, and soon there will be a rise again,” he said at a huge energy-industry conference in Houston.
For the moment, though, low oil prices translate into savings for consumers.
In South Carolina, the average dropped to an even $1.50 a gallon Monday, down 2 cents during the past week, according to gas price service GasBuddy and motor club AAA’s Daily Fuel Gauge Report. That’s about 55 cents lower than the same time one year ago.
The cheapest average gas in the state can be found in the Greenville-Spartanburg area at about $1.45, according to AAA.
In Charleston-North Charleston, the average price is about $1.53. Prices in the Lowcountry Monday ranged from as low as $1.39 in West Ashley to $1.65 on Daniel Island, according to GasBuddy.
The U.S. Energy Information Agency expects an average price of $1.98 per gallon nationwide this year. The last time oil averaged less than $2 for a full year was 2004. Oil prices have tumbled 70 percent since mid-2014, to levels last seen in 2003, and gasoline prices have followed.
Gas prices are expected to start rising in the spring as refineries switch to federally mandated, more fuel-efficient blends ahead of the summer driving season.
The national price edged up about 2 cents during the past week to an average $1.71 a gallon, namely because Midwest refineries cut production, according to Will Speer, GasBuddy’s senior petroleum analyst. That’s still about 58 cents less than a year ago.
“Many motorists in the Midwest saw an ugly surprise at the gas pumps last week, as prices spiked as high as 23 cents per gallon in one week’s time in places,” Speer said. “The rest of the U.S. enjoyed another week of declining gas prices.”