Global oil supply and demand will drive gas prices in 2013

As the price of oil fluctuates, the price of gasoline prices at the pump will also fluctuate. Given the numerous factors affecting global supply and demand for oil, the price of gasoline should be expected to continue the meaningful volatility observed in 2012.

The Organization of the Petroleum Exporting Countries currently consists of 12 countries.

Saudi Arabia, with oil production of approximately 8.8 million barrels per day, is the leading oil-producing country in OPEC. OPEC was initially formed in September 1960 and is currently headquartered in Vienna, Austria.

Global supply and demand for oil is significantly correlated with the retail price of gasoline in the U.S. and in other oil-importing countries. Non-OPEC oil production was reported to be just below 53 million barrels per day in 2012. The year 2013’s oil production by these same countries is currently estimated to total approximately 54 million barrels per day.

Oil production in the U.S. is forecast to increase by about 500,000 barrels per day to total about 10.5 million barrels per day in 2013. Ongoing development of oil production capacity linked to shale formations is expected to be the primary driver of increased U.S. oil production in 2013.

In 2012, the OPEC countries produced an average of 32.4 million barrels per day, according to their own reporting. During the month of January 2013, the OPEC countries reported producing an average of 31.7 million barrels of oil per day.

Next to Saudi Arabia, Iran is the highest oil-producing country in OPEC. On average in 2012, Iran produced 3.7 million barrels per day of oil.

Many factors can affect the price for oil. Political tensions in areas of the globe where significant amounts of oil are produced, refining capacity and the ability of tankers to move oil from suppliers to refiners can all dramatically influence oil supply.

Overall demand for oil is primarily driven by the level of economic activity occurring around the globe. For 2013, aggregate global oil demand is forecast to average 89.7 million barrels per day, representing an increase of 0.8 million barrels per day from 2012’s demand level. Recent reports suggest China’s demand for oil increased to 10.5 million barrels per day in late 2012, an increase of about 6 percent from the same period in 2011.

As the price of oil fluctuates, the price of gasoline prices at the pump will also fluctuate. Given the numerous factors affecting global supply and demand for oil, the price of gasoline should be expected to continue the meaningful volatility observed in 2012.

Kirby Brown is the CEO of Beneficial Financial Group in Salt Lake City.