We noted, on Wednesday, October 5th, that very much contrary to President Joe Biden’s wishes, Russia and Saudi Arabia pushed OPEC+ to set a reduction in petroleum production of 2,000,000 barrels per day:
Saudi Arabia and Russia, acting as leaders of the OPEC Plus energy cartel, agreed on Wednesday to their biggest production cuts in more than two years in a bid to raise prices, countering efforts by the United States and Europe to choke off the enormous revenue that Moscow reaps from the sale of crude.
President Biden and European leaders have urged more oil production to ease gasoline prices and punish Moscow for its aggression in Ukraine. Russia has been accused of using energy as a weapon against countries opposing its invasion of Ukraine, and the optics of the decision could not be missed.
“This is completely not what the White House wants, and it is exactly what Russia wants,” said Bill Farren-Price, the head of macro oil and gas analysis at Enverus, a research firm. It also puts Saudi Arabia on a diplomatic “collision course” with the United States, he said.
The cut of two million barrels a day represents about 2 percent of global oil production.
Karine Jean-Pierre, the White House press secretary, told reporters that the decision was a “mistake and misguided. “It’s clear that OPEC Plus is aligning with Russia with today’s announcement,” she said.
The United States is hardly a nation President Vladimir Putin wants to please: the US continues to send money and war materiel to Ukraine, which is directly at war with Russia, so the US is, in effect, engaged in a proxy war with Russia. Maybe, just maybe, Vladimir Vladimirovich isn’t in any mood to do favors for Mr Biden.
And, of course, Mr Biden directly accused Saudi Crown Prince of ordering the murder of Jamal Khashoggi, and called teh Crown Prince a liar for denying it. Could it possibly be that the de facto ruler of the world’s largest petroleum exporter is not really inclined to be nice to our President?
Well, now the effects of the OPEC+ decision are becoming known:
Why gas prices are going back up after nearly 100 days of declines
by Rob Wile | Monday, October 10, 2022
It was the longest losing streak for gasoline prices since the early months of the pandemic: For 98-consecutive days this summer, American drivers experienced declining gas prices thanks in part to a slower worldwide demand for oil.
Now, a cut in oil production signaled by the OPEC+ group last week has sent global crude prices higher, bringing upward pressure back to prices at the pump.
According to AAA, the national average gas price climbed to $3.92 a gallon Monday.
Prices are likely to keep going higher from here as oil prices continue to climb, according to Patrick De Haan, chief petroleum analyst at gas price tracking group GasBuddy.com.
“With OPEC+ deciding to cut oil production by two million barrels a day, we’ve seen oil prices surge 20%, which is the primary factor in the national average rising for the third straight week,” he said in a blog post Monday.
For the rest of the country, De Haan said he expects prices to rise as much as $0.30 from their September lows, which would put them at around $4 a gallon.
It’s not all peaches and cream in OPEC+: as The Wall Street Journal reported, Iraq is concerned that it cannot afford the mandated production cuts, but that’s somewhat counterbalanced by a strike among Iranian oil workers. That does mean that projections that gasoline will reach into the $4.00+ per gallon range a bit more guesswork than straight statistical modeling.
The most important point? The election is in 29 days.