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In recent news, OPEC and its allies have made a surprising decision to slash oil production. This move will have a direct impact on US gas pumps. OPEC+ announced that they will cut oil production by over 1.6 million barrels a day starting in May and continuing until the end of the year. As a result, both Brent crude futures and WTI, the US benchmark, have increased by approximately 6% in trading Monday.
This announcement has caused an immediate effect on gasoline futures, which will result in higher prices for US drivers. RBOB, the closely watched wholesale gasoline price, has already increased by about 8 cents a gallon, or roughly 3%, in morning trading.
Experts believe that this move by OPEC is likely to reawaken the inflation monster. Tom Kloza, global head of energy analysis for OPIS, states that this news may have caught the White House off guard and they will not be pleased. The impact on gas prices will be noticeable, and we can expect the national average for US gas prices to rise from $3.51 to potentially $3.80 to $3.90 in a relatively short period.
Although we won’t see prices reach the record levels of 2022, there is a possibility of US drivers experiencing higher prices compared to last year. This could be especially true if there are hurricanes or other storms affecting production along the Gulf Coast. It’s important to note that the average US regular gas price a year ago stood at $4.19 a gallon in the aftermath of Russia’s invasion of Ukraine.
However, there are factors that may prevent prices from reaching those levels again. The US has plans for additional releases from the Strategic Petroleum Reserve, and both US oil production and refining capacity have increased. Nevertheless, it won’t be easy to make up for the cut of 1 million barrels a day of oil by OPEC+. They are determined to reduce production, and it remains to be seen how this will impact gas prices in the coming months.
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