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Area gas prices lower than U.S. average

Pumps were busy Wednesday afternoon at the Shell station on South Street in Richmond. The price of a gallon of gasoline here recently fell to $1.77, and was even 10 cents lower at stations across the river in Lexington. (Photo by David Knopf/Richmond News)

Pumps were busy Wednesday afternoon at the Shell station on South Street in Richmond. The price of a gallon of gasoline here recently fell to $1.77, and was even 10 cents lower at stations across the river in Lexington. (Photo by David Knopf/Richmond News)

By JoEllen Black-Richmond News Publisher

How low will it go?

With a worldwide oil glut and weak demand, market analysts say to expect prices to remain on a downward trend – at least for the short term.

“It hasn’t bottomed out yet. We’re getting close. You’re going to see ups and downs,” Paul Harris, Ray-Carroll fuels manager said Tuesday.

Crude dropped to $47.41 a barrel Thursday – a 56 percent decrease compared to June 2104 – after seeing prices rise last week. Retail gas prices have fallen to $1.77 in Richmond and $1.67 a gallon in Lexington.

The reason, Harris says, is OPEC’s attempt to regain dominance of the U.S. market.

“In Saudi Arabia and the Middle East, the region relies on so many dollars per barrel for their nation’s budget. Financially, they have a strong reserve so they’re willing to take less to survive to stop production in the U.S. so they don’t give up any more market share,” Harris said.

Horizontal drilling and hydraulic fracturing of shale oil, known as fracking, has moved the U.S. ahead of Saudi Arabia in oil production, Harris said, with Russia ranking third.

In order to maintain market share, OPEC decided to maintain its production output, which has sent oil prices falling.

A breakeven price for Middle Eastern crude is $27 a barrel. For U.S. shale oil producers, it’s $65 per barrel, according to Market Realist.

“They can pump it out of the ground cheaper than we can because they’ve got oil rigs in place,” Harris said.

The complete story is in the Thursday, Jan. 22, 2015 Richmond News.

Click here for our E-edition and read the rest of the story.

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