new York
CNN
—
The surprise decision by OPEC and its allies to significantly cut oil production will soon be felt at American gas pumps.
The OPEC+ group announced on Sunday that it would cut its oil production by more than 1.6 million barrels per day from May until the end of the year. The news sent futures for Brent crude, the global oil benchmark, and WTI, the U.S. benchmark, up about 6% in Monday trading.
The announcement of a production cut also had an immediate impact on gasoline futures prices, which will be passed on to American drivers much faster than the surge in oil prices. RBOB, the most closely watched wholesale gasoline price, rose about 8 cents a gallon, or about 3 percent, in morning trading.
“I think OPEC is waking up the inflation monster,” said Tom Kloza, global head of energy analysis for OPIS, which tracks AAA gas prices. “The White House must be shocked and deeply upset. This certainly changes the calculus for a while.
The national average gas price in the United States stood at $3.51 on Monday, according to AAA. Kloza said he could see its price reach $3.80 to $3.90 in a relatively short time thanks to OPEC’s decision.
“We’re not going to go back to $5 a gallon. I don’t even think we can get to $4,” he said. But he added that by the end of the summer, U.S. drivers could return above prior year prices, especially if a hurricane or other storms affect production along the coast of the Gulf.
A year ago, the average price of regular gas in the United States was $4.19 per gallon following Russia’s invasion of Ukraine and the disruption it caused to global energy markets. Prices eventually reached a record high of $5.02 per gallon on June 14, before beginning a slow but steady decline over the course of more than three months in which the average price fell each day. This decline is partly explained by the release of oil from the United States Strategic Petroleum Reserve, and partly by fears of a U.S. or global recession that would reduce demand for gasoline.
Even at $3.51, U.S. gas prices were just below the $3.53 average on February 23, 2022, the day before Russia invaded Ukraine.
Kloza said one of the things keeping prices from approaching record 2022 levels is that the U.S. is planning additional releases from the SPR, and U.S. oil production and refining capacity are both on the rise. But a reduction of one million barrels of oil per day by OPEC+ will not be easy to make up for.
“They have the capacity to reduce production and seem motivated to do so,” he said.