Oil Production Cut Looms Over US Gas Prices, Inflation Concerns Grow
In a surprise move, the Organization of the Petroleum Exporting Countries (OPEC+) has announced that it will slash oil production by over 1.6 million barrels per day starting in May and running through the end of the year. This cut is expected to have an immediate impact on global oil prices, with Brent crude futures rising by about 6% and US benchmark WTI up by around 3% in trading on Monday.
The reduction in oil production will also lead to higher gasoline futures, which will be passed onto US drivers much more quickly than the spike in oil prices. According to Tom Kloza, global head of energy analysis for OPIS, the White House is likely to be "shocked and major-time pissed" by this move, as it could alter the calculus for inflation.
The national average for US gas prices stands at $3.51 per gallon, according to AAA, and Kloza expects this price to rise to $3.80 to $3.90 in relatively short order due to the OPEC+ production cut. However, he notes that prices are unlikely to reach record levels of $5 a gallon, but could potentially return to year-earlier prices by the end of the summer if storms affect oil production along the Gulf Coast.
It's worth noting that US gas prices were just below the $3.53 average on February 23, 2022, the day before Russia's invasion of Ukraine, when prices reached a record high of $5.02 per gallon. However, Kloza attributes this to factors such as oil releases from the Strategic Petroleum Reserve and concerns about recession.
One factor that could help keep prices in check is the US plans for additional oil releases from the SPR, which could offset some of the impact of the OPEC+ production cut. Additionally, US oil production and refining capacity have both increased since 2022, providing a cushion against price spikes.
Despite these factors, Kloza believes that OPEC's ability to cut production and their motivation to do so means they are likely to make this move. As a result, US drivers can expect higher gas prices in the coming weeks and months.
In a surprise move, the Organization of the Petroleum Exporting Countries (OPEC+) has announced that it will slash oil production by over 1.6 million barrels per day starting in May and running through the end of the year. This cut is expected to have an immediate impact on global oil prices, with Brent crude futures rising by about 6% and US benchmark WTI up by around 3% in trading on Monday.
The reduction in oil production will also lead to higher gasoline futures, which will be passed onto US drivers much more quickly than the spike in oil prices. According to Tom Kloza, global head of energy analysis for OPIS, the White House is likely to be "shocked and major-time pissed" by this move, as it could alter the calculus for inflation.
The national average for US gas prices stands at $3.51 per gallon, according to AAA, and Kloza expects this price to rise to $3.80 to $3.90 in relatively short order due to the OPEC+ production cut. However, he notes that prices are unlikely to reach record levels of $5 a gallon, but could potentially return to year-earlier prices by the end of the summer if storms affect oil production along the Gulf Coast.
It's worth noting that US gas prices were just below the $3.53 average on February 23, 2022, the day before Russia's invasion of Ukraine, when prices reached a record high of $5.02 per gallon. However, Kloza attributes this to factors such as oil releases from the Strategic Petroleum Reserve and concerns about recession.
One factor that could help keep prices in check is the US plans for additional oil releases from the SPR, which could offset some of the impact of the OPEC+ production cut. Additionally, US oil production and refining capacity have both increased since 2022, providing a cushion against price spikes.
Despite these factors, Kloza believes that OPEC's ability to cut production and their motivation to do so means they are likely to make this move. As a result, US drivers can expect higher gas prices in the coming weeks and months.
oil prices are gonna be through the roof soon I'm like, what's up with OPEC+? They're just going to cut production and watch us suffer 
my buddy's wife just got a raise at work and now they can't afford to fill up their tank 
and all these new cars everyone's been buying... that's gonna add up too 
. And yeah, the White House might be a bit miffed about it, but let's not forget they're also planning on releasing more oil from the SPR 
. I'm kinda hoping that'll help offset some of the price spike.
. So yeah, I guess we're in for a bit of a gas price hike 
.
I'm already dreading the summer road trips with my kiddos 
. One thing's for sure, we're gonna be seeing more empty pockets at the gas station soon 
. It's not just about the money, though - it's about all the extra expenses that come with higher prices. Have you seen how expensive snacks are already?! 
...
$3.80 to $3.90 per gallon? That's just crazy talk! I remember when I was still living on my parent's basement back in 2022, I thought $5 a gallon was insane 
, just what we needed more price hikes 
? The OPEC+ decision to cut production is like a big ol' middle finger to American wallets 
. And yeah, it's not like the White House was planning on dealing with higher gas prices anyway 
. It's all just part of the beautiful mess we call our economy 
.
. I mean, come on, $3.80 to $3.90 a gallon is still pretty steep for most people 
.
. Yeah, right 
its like they're trying to give us high gas prices on purpose lol. $3.51 per gallon is already kinda steep, now it's gonna go up to $3.80 or $3.90? that's just crazy 
. I'm all for some stability, but can't we get that without OPEC's drama? 
My money's on $3.80-$3.90 avg gas price soon 
Only way to mitigate this is for SPR releases, but let's see if it's enough to keep prices from skyrocketing