The Implications of OPEC’s Unexpected Oil Cut on Gasoline Prices

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In recent news, the group known as OPEC+ has announced a surprise move to slash oil production by more than 1.6 million barrels a day starting in May. This decision will have a direct impact on gas prices in the US.

The announcement has already led to an increase in oil prices, with both Brent crude futures and WTI experiencing a 6% rise. Additionally, gasoline futures have also been affected, causing an immediate increase in wholesale gasoline prices.

Experts believe that this move by OPEC+ will lead to an inflationary effect on gas prices. Tom Kloza, global head of energy analysis for OPIS, stated that the White House should be shocked and majorly concerned by this decision. He predicts that the national average for US gas prices could reach $3.80 to $3.90, thanks to the OPEC+ production cut.

However, Kloza does not believe that gas prices will reach record levels like they did in 2022, when they hit $5.02 a gallon. He credits this to the US’s plans to release additional oil from the Strategic Petroleum Reserve, as well as the increase in US oil production and refining capacity. Nonetheless, he acknowledges that it will be challenging for OPEC+ to make up for the cut of 1 million barrels a day.

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