After a year of turmoil at the pump, the OPEC coalition declared on Wednesday that it will reduce oil production by 2 million barrels per day.
The OPEC alliance noted the “uncertainty that surrounds the global economic and oil market outlooks” in its statement announcing the cuts.
Since the outbreak of the pandemic, this constitutes the biggest production reduction.
The Biden administration expressed disappointment in the choice in a statement, calling it stupid in light of the fact that Russia’s invasion of Ukraine had already driven up energy costs globally.
According to the report, lower- and middle-income countries, which are already suffering from high energy prices, will be the most negatively impacted by this development at a time when preserving the world’s energy supply is of utmost importance.
Following a surge in oil and gas prices this summer due to the Russian invasion of Ukraine, the oil cartel and its allies announced their decision in Vienna. As President Joe Biden tried to ease the strain on Americans’ wallets and lower petrol prices ahead of the midterm elections, prices trended lower from July to mid-September.
Global oil prices are now anticipated to increase from roughly $93 to $100 per barrel, with U.S. benchmark prices increasing from $88 to $92. The price of oil had risen to as much as $128 a barrel globally at the time of Russia’s invasion of Ukraine.
According to Caroline Bain, head of commodities research at Capital Economics, “we had always expected supply growth to stall later this year and into 2023, but this fresh OPEC action has re-enforced our view that prices will conclude the year a little higher.”
Due to rising demand and problems with American refineries, gas prices in the United States had already been going higher in recent weeks. Wednesday had the highest gallon-average price since late August at $3.83.
According to a statement released on Monday by AAA spokesperson Andrew Gross, there are now significant regional variances in gas costs, with West Coast prices reaching $6 per gallon and higher while prices in some Texas and Gulf Coast regions are as low as $3.
According to Gross, at least six refineries in California are undergoing repair, and there is a meager pipeline supply from regions east of the Rockies to the West Coast.
Gas prices and Biden’s approval rating are strongly correlated, according to political observers, since voters use gas prices as a proxy for inflation and, consequently, the health of the economy.
Wall Street analysts claim that in order to counter OPEC’s action, the Biden administration might release stocks from the country’s strategic petroleum reserve and possibly strengthen the so-called NOPEC bill bill, which would punish other oil-producing governments by making them vulnerable to antitrust lawsuits.
Saudi Arabia is the de facto leader of OPEC, which is made up of 11 non-member allies and 13 oil-exporting nations, including Russia.