Implications of OPEC’s Unexpected Oil Cut on Gasoline Prices
We are an awesome company that provides complete software development activities utilizing nearshore and offshore resources. Our services include mobile app development, technology maintenance, web server development, and many other technology development activities.
In recent news, OPEC and its allies have made a surprise move to slash oil production. This decision will soon have an impact on US gas pumps. OPEC+ announced that they will cut oil production by over 1.6 million barrels a day starting in May and continuing until the end of the year. As a result, both Brent crude futures (the global oil benchmark) and WTI (the US benchmark) experienced a 6% increase in trading on Monday.
The announcement of the production cut also had an immediate effect on gasoline futures, which will be passed on to US drivers much faster than the spike in oil prices. RBOB, the most closely watched wholesale gasoline price, saw an increase of about 8 cents a gallon, or approximately 3%, in morning trading.
This move by OPEC is expected to revive inflation, according to Tom Kloza, global head of energy analysis for OPIS. He believes that the White House will be shocked and unhappy about this decision. The national average for US gas prices currently stands at $3.51, but Kloza predicts that it could reach $3.80 to $3.90 in a short amount of time due to the actions taken by OPEC.
However, Kloza does not believe that gas prices will reach the record levels of $5 a gallon. He does foresee that US drivers could experience prices above the levels of the previous year, especially if there are hurricanes or other storms impacting production along the Gulf Coast during the summer.
It is worth noting that the average US regular gas price a year ago was $4.19 a gallon due to Russia’s invasion of Ukraine and the subsequent disruption in energy markets. Prices eventually reached a record high of $5.02 a gallon on June 14. However, they steadily declined over the course of three months with the help of releases from the US Strategic Petroleum Reserve and concerns about a potential recession that could reduce gasoline demand.
Even with the current average gas price of $3.51, it is close to the average of $3.53 on February 23, 2022, the day before Russia’s invasion of Ukraine. Kloza believes that the additional releases from the Strategic Petroleum Reserve and the increase in US oil production and refining capacity have prevented gas prices from reaching the record levels of 2022. However, the 1 million barrel cut in oil production by OPEC+ will not be easy to compensate for.
In conclusion, OPEC and its allies’ decision to slash oil production will have an impact on US gas prices. While we cannot predict the exact outcome, our awesome company is dedicated to providing comprehensive software development services, including mobile app development, technology maintenance, web server development, and many other technology development activities.