What the OPEC+ oil production cut means for gas prices

According to an industry analyst, Sunday’s OPEC+ meeting could have an impact on the recent drop in domestic gas prices.

According to AAA, the Saudi Arabia-led OPEC oil cartel and allied producers, including Russia, have decided to maintain production cuts of two million barrels a day to boost the world price of oil.

Recently, the price of oil has fallen over fears that coronavirus outbreaks and strict zero-COVID restrictions in China will reduce demand for fuel in a major economy. On top of that, recession fears in the US and Europe are raising the prospect of lower demand for gasoline and other fuels made from crude oil.

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“Gasoline prices are down sharply and are only a nickel higher per gallon than a year ago,” said AAA spokesman Andrew Gross. But, since oil is the main ingredient in gasoline, “OPEC+’s decision could slow this downturn,” although prices are likely to still be lower than they were a year ago, Gross added. .

Sheetz fuel pump

A gas pump at a Sheetz convenience store in Pennsylvania. (Paul Weaver/SOPA Images/LightRocket via Getty Images/Getty Images)

On Monday, AAA reported that the national average for a gallon of gasoline fell 14 cents to $3.40 over the past week. That’s down from an average of $3.79 a month ago and a record high of $5 at the start of the summer, according to AAA data.

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Sunday’s meeting with 23 oil-producing nations came just a day before planned sanctions aimed at hitting Russia’s oil revenues in retaliation for its invasion of Ukraine come into effect, potentially tightening supply and driving up prices.

This includes a European Union boycott of most Russian oil and a $60-a-barrel price cap on Russian exports imposed by the EU and the Group of Seven democracies.

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It is unclear how much Russian oil the two sanctions measures could remove from the world market.

The White House, which has been pushing for more oil supplies, called OPEC+’s decision to cut production quotas, announced in October, “myopic.”

“At a time when maintaining a global energy supply is of paramount importance, this decision will have the most negative impact on low- and middle-income countries that are already reeling from high oil prices. energy,” National Security Advisor Jake Sullivan and NEC Director said. Brian Deese said in a joint statement.

The Associated Press contributed to this report.

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