In my opinion, confused bemusement is the only wording couplet that comes to mind when reviewing the 2022 forecasts as uttered by the self-proclaimed energy experts, which I have now named the “Enertrolls,” which could be suspiciously shortened to ETs – or experts from another planet.

The question on most consumers’ minds these days (at least the ones who drive to an office that is not at the end of their own driveway) is: where are gasoline and diesel prices headed in 2022?

As the source of all the fossil derived fuel is crude oil, where is that price going?

To answer that one, we must look at supply.

Where is the crude coming from?

Then of course, who controls the supply?

We may not like the answer because it is still OPEC or any other variation on a pricing cartel name you’d like to use. You can change the name to OPEC + which is a 23-member group of crude oil producers but the reality of it is, you can narrow it down to just two: the Saudis and the Russians.

According to a recently published bulletin, (could it be the “Enertrolls” who wrote it?) the Saudis need a Brent breakeven price point of $72.50 per barrel to maintain a balanced budget while Russia’s number is $69/bbl. The apparent consensus required to satisfy both parties would be a price in the range of $65 to $75/bbl.

Some Wall Street investment houses have thrown out numbers more than $100/bbl but they don’t control the price – only their in-house headlines are controlled.

I cannot see $100/bbl any time soon as OPEC would not want to wake up the U.S. shale oil industry from its hibernation thereby eroding Saudi’s market share.

Nor would they want to get another phone call from President Joe Biden arm twisting them into submission to increase their production so that sky-high pump prices will get off the front pages in Washington and around the country with midterms just around the corner.

Surprisingly, OPEC has agreed to maintain its monthly production increase at 400,000 bpd but there are opinions swirling around that some members of the cartel can’t keep up with their quotas so the actual number may be well below the 400,000 bpd. target.

As for refined product demand being a threat to crude oil; OPEC does not see the latest variant slowing demand because the main consuming nations are adapting to the health driven mandated vaccination protocols.

According to the latest EIA report, demand for gasoline, diesel, and jet fuel are well in excess of supply. Gasoline, pump, and diesel rack prices are hitting record levels in some parts of the country.

So where are prices going?

What you see today is what you’ll get in the future.

We’re already there.

– Roger McKnight – B.Sc., Senior Petroleum Analyst

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