Workers secure drilling pipes on an oil drilling tower operated by...

Workers secure drilling pipes on an oil drilling tower operated by Tatneft OAO near Almetyevsk, Russia, on July 31. Credit: Bloomberg/Andrey Rudakov

Long Island consumers and businesses could see lower gas prices this summer after a group of oil exporting countries said it would significantly increase oil production in June. 

U.S. crude oil prices have been trending lower since January when the price per barrel was more than $78. Following the announcement of higher production, oil prices fell about 2% on Monday to their lowest level since 2021. The price of a barrel of West Texas Intermediate, a U.S. benchmark, rebounded on Tuesday, rising about 3.4% to $59.11 as of 4 p.m.

Still, the price per barrel is down about 24% compared with a year ago, and fell sharply last month amid concerns about the effects new tariffs imposed by President Donald Trump might have on global demand for fuel.

On Long Island, the drop in oil prices means significantly lower gas prices than a year ago, according to AAA. The price per gallon on Long Island was $3.03 on average on Tuesday. That was down from an average of $3.69 a year ago, according to AAA. 

Here are five things to know about why oil prices are falling and what it means for Long Islanders.

Why did the price of a barrel of oil fall?

The price of U.S. crude oil — liquid petroleum that is extracted and refined to create products such as gasoline, diesel fuel and heating oil — dropped after members of OPEC+, including Saudi Arabia, Russia and Iraq, said Saturday they would increase oil production by 411,000 barrels of oil next month.

That increase was greater than expected, said Patrick De Haan, head of petroleum analysis at GasBuddy, and represents a significant turnaround from a few months ago when OPEC had cut its oil production.

“OPEC raising oil production was largely unexpected at this pace, and that’s why the price of oil is reacting in the way we’re seeing today,” he said Monday.

Why is the price of oil important to the economy?

The United States is the world’s largest consumer and producer of oil. 

De Haan described it as a “win for consumers now that oil prices are declining but also a concerning sign for U.S. oil producers who may react to lower oil prices by curbing their own production."

But falling oil prices are also a negative indicator of the economic outlook, said Robert Sinclair Jr., a spokesman for AAA Northeast in Garden City. Fears that tariff policies will result in less economic activity, and as a result less demand for crude oil, also factor into falling prices, Sinclair said.

“That’s playing into the price of crude oil falling the way it has in the last week,” he said.

What do fluctuations in the price of oil signal to investors? 

The price of oil “can be a telltale sign of what’s happening in the U.S. economy,” De Haan said.

An increase could signal stronger demand from consumers and businesses and greater future economic output, while a decline — as was evident during the early days of the COVID-19 pandemic — can show how the economy is slowing, he said.

How does that translate to gas prices?

The drop is a sign that gas prices could fall further this summer, De Haan said.

“For now, it’s going to mean that this summer sees some of the lower gas prices for the summer driving season that we’ve seen since the pandemic," he said. 

Gas prices haven't fallen as much as oil this spring because refineries have been in the middle of seasonal maintenance, which limits their production. As that maintenance ends, gas prices could move lower, De Haan said.

What does the drop mean for Long Island's economy?

Lower fuel costs will create savings for Long Island consumers and businesses and free up money for other spending, said Steven Kent, chief economist of the Long Island Association.

"If you're spending less money on gas, oil to heat your home and electricity, that means you have more money in your pocket to spend on other products and services," said Kent, a Molloy University economics professor.

It could also boost consumer sentiment, which fell sharply last month, because of how frequently consumers take note of gas prices. 

However, lower fuel costs don't outweigh the economic threat posed by tariffs on imported goods, Kent said.

"Make no mistake, higher tariffs and lower government spending are much bigger factors in today's Long Island economy than lower oil prices," he said. "Lower oil and gas prices are helpful, but they will not solve some of the problems businesses and consumers will be facing."

Get the latest news and more great videos at NewsdayTV Credit: Newsday

New revelations in Gilgo documentary ... Keeping pets safe from ticks ... LI Works: Taking a spin at Adventureland ... Get the latest news and more great videos at NewsdayTV

Get the latest news and more great videos at NewsdayTV Credit: Newsday

New revelations in Gilgo documentary ... Keeping pets safe from ticks ... LI Works: Taking a spin at Adventureland ... Get the latest news and more great videos at NewsdayTV

SUBSCRIBE

Unlimited Digital AccessOnly 25¢for 6 months

ACT NOWSALE ENDS SOON | CANCEL ANYTIME