OPEC is Slashing its Oil Production Despite Pressure From Biden Administration, Here’s Why it Impacts You
The Organization of the Petroleum Exporting Countries (OPEC+) is slashing its oil production, and that’s bound to have an impact on global oil prices as the reduced production will create a supply deficit.
With OPEC+ and other oil and gas companies having high demand during the COVID-19 outbreak, Americans finally saw some relief at the gas pump and thought the worst was in the rear-view mirror. However, thanks to OPEC’s decision to cut production, here’s what consumers should expect.
With gas prices dropping during the summer, oil and gas companies are reluctant to see their revenue decline. Therefore, what’s the best way for these mega corporations to keep the good times rolling? Through slashing oil production, forcing prices higher.
Since a handful of companies and mass corporations own a large portion of all the oil, it’s easy for these companies to have a monopoly on the market, ultimately draining your pockets even further at the pump if they so choose.
Now, in response to increasing interest rates, high inflation, and the recent deterioration of the world economy, OPEC+ agreed to reduce oil production by 2 million barrels a day, the first proposed target reduction since the COVID-19 pandemic.
The Biden administration urged the Saudi Arabian Crown Prince Mohammed bin Salman to prolong the decision by a month to push the negative impacts of spiking oil and gas prices past the midterm elections. Biden’s appeal appears to have fallen on deaf ears, as not long after OPEC+ decided to cut oil production, which some think could tip the world further into recession.
U.S. President Joe Biden reacted to the news by saying:
“There will be consequences for that decision.”
What those consequences will entail is still unknown.
Source: Today YouTube
After this announcement, Brent crude oil price, the international benchmark, rose 1.7%, reaching $93.29 a barrel.
John Kirby, White House coordinator for strategic communications at the National Security Council, commented on the OPEC decision, stating:
“We presented Saudi Arabia with analysis to show that there was no market basis to cut production targets and that they could easily wait for the next OPEC meeting. Other OPEC nations communicated to us privately that they also disagreed with the Saudi decision but felt coerced to support Saudi’s direction.”
Do you think this is a ploy for OPEC to continue lining its pockets by cutting oil production and spiking the cost at the pump?
Or is its reasoning genuine in response to worsening economic conditions?
Brent Crude Oil (BZ) last traded at $92.11, up 0.53% on the day. YTD, Brent Crude is up 25.58%.
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