The discovery of a new and reportedly more infectious strain of the coronavirus, the newly dubbed Omicron variant, will likely give OPEC+ countries reason to pause planned production increases. Said production increases typically offer relief concerning rising gas prices.
Bloomberg reported that the 23-nation alliance, led by Saudi Arabia, is leaning toward abandoning a plan for a modest production hike scheduled for January when it meets on Dec. 1 through Dec. 2. A group of delegates for the alliance stated that OPEC was already considering a pause after the U.S. and other consumers announced the release of emergency oil stockpiles in recent days.
Oil and gas prices have surged over the course of the past year. High prices have recently prompted President Joe Biden to announce plans to release some of the country’s emergency oil stockpiles. This move seems aimed at offering reprieve to consumers who have been struggling with 6% inflation, as well as gas prices up a whopping 50% from last year.
During the coronavirus pandemic, the OPEC nations decided to cut back on production, as the virus virtually halted all airline travel and lessened demand for gasoline as consumers were locked down throughout the world. Oil-producing nations were unprepared when the international economy, and subsequent consumer demand, suddenly surged again late last year. Producers struggled to keep up, pushing oil and gas prices to historic levels.
OPEC was said to have slowly increased their production in January, reacting to improved economic indicators like recuperating employment and a pickup in international travel — indicators which may have started to ease gas prices across the globe.
News of the Omicron variant may put a pause on plans for increased production, however.
“The emergence of a new Covid variant that could spawn renewed shutdowns and travel restrictions is precisely the type of change in market conditions that could cause ministers to deviate from their plan” to add barrels, said Bob McNally — president of consultant Rapidan Energy Group and a former White House official — per Bloomberg.
If OPEC ultimately decides to curb production, this could put an even larger strain on already pressured oil prices — which means that for the average consumer, high gas prices are likely to stick around for a while longer.
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