How Much Will Gas Prices Go Up as OPEC Slashes Oil Production?

"Photo of a young man watching filling his gas tank, watching in disbelief as the dollar amount climbs on the gas pump display too quickly to comprehend.
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Gas prices that are already ticking back up again might increase another 10% or more following a move by the Organization of the Petroleum Exporting Countries and its allies to cut oil production by 2 million barrels a day.

The decision by the oil cartel was announced in Vienna on Wed. Oct. 5, NBC News reported. It comes during an especially vulnerable period for the global oil supply, which has been weakened by Russia’s invasion of Ukraine as well as by ongoing supply chain problems.

Industry researcher Capital Economics estimates that global oil prices will rise to about $100 a barrel from $93 currently, NBC News noted. U.S. benchmark prices are expected to climb to $92 a barrel from $88.

The national average price of gasoline in the United States was $3.867 a gallon as of Oct. 6. That’s up from $3.782 a week ago and $3.779 a month ago but still well down from the all-time high of $5.016 set on June 14, 2022.

Claudio Galimberti, head of Americas analysis at Rystad Energy, said U.S. gas prices could increase by about 10% in much of the country, The Washington Post reported. But a lot depends on how other market factors play out.

“The intention of the OPEC Plus cut was to break the fall in crude prices since the summer,” Bob McNally, an energy analyst at the Rapidan Energy Group, told the WaPo. “If they succeed, then gasoline pump prices should also stop falling and range around current levels, until other market drivers impact the price.”

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Gas prices will likely be impacted more in some regions of the country than others.

“The regional differences in gas prices are stark at the moment, with prices on the West Coast hitting $6 a gallon and higher, while Texas and Gulf Coast states have prices dipping below $3 in some areas,” AAA spokesperson Andrew Gross said in a Mon., Oct. 3 news release.

He noted that at least six California refineries are undergoing maintenance, and “there is limited pipeline supply to the West Coast from locations east of the Rockies.”

The Biden administration — which has put a high priority on bringing gas prices down ahead of the 2022 midterm elections — was quick to lash out at OPEC’s decision. As the WaPo reported, administration officials have pressured OPEC leader Saudi Arabia to produce more oil to compensate for the global shortage caused by Russia’s invasion of Ukraine. President Biden himself even visited Saudi leaders during a trip to Jiddah.

“The President is disappointed by the shortsighted decision by OPEC Plus to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” U.S. national security adviser Jake Sullivan and National Economic Council Director Brian Deese said in a joint statement.

The White House does have a couple of options to help offset OPEC’s move. One is to tap into the U.S.’s strategic petroleum reserve, which it has already done this year. Another is to lobby hard for passage of the No Oil Producing and Exporting Cartels bill, which would penalize other oil-producing countries by opening them up to antitrust suits.

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The non-partisan NOPEC bill was sponsored by Sens. Chuck Grassley (R-Iowa) and Amy Klobuchar (D-Minn.) and passed 17-4 in the Senate Judiciary Committee back in May, Reuters reported. If signed into law, it would give the U.S. attorney general the option to sue the oil cartel or its members in federal court as a way to protect U.S. consumers and businesses from engineered oil spikes.

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