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In recent news, OPEC and its allies shocked the market by announcing a significant cut in oil production. This decision will soon have an impact on US gas prices, causing an increase that will be felt by American drivers. The production cut of over 1.6 million barrels per day is set to begin in May and extend throughout the year. As a result, both Brent crude futures and WTI, the US benchmark, experienced a 6% surge in trading on Monday.
The immediate effect of this announcement can already be seen in gasoline futures. Wholesale gasoline prices, particularly RBOB, rose by about 8 cents per gallon, or approximately 3%, in morning trading. Experts believe that this increase will be passed on to US drivers much more quickly than the rise in oil prices.
Tom Kloza, the global head of energy analysis for OPIS, expressed his concerns about the inflationary impact of OPEC’s decision. He believes that the US government must be shocked and upset by this move as it significantly alters the economic calculations. Kloza also predicts that the national average for US gas prices, which currently stands at $3.51, could rise to $3.80 to $3.90 in a relatively short period due to OPEC’s actions.
While Kloza does not believe that gas prices will reach the record levels seen in the past, he warns that US drivers could experience year-earlier prices by the end of the summer, particularly if there are any hurricanes or storms affecting production along the Gulf Coast. In 2022, the average price of regular gas reached $4.19 per gallon following Russia’s invasion of Ukraine. It later peaked at a record $5.02 per gallon on June 14, before gradually declining over three months.
Kloza suggests that even though US gas prices are currently close to the average price before Russia’s invasion of Ukraine, the ongoing releases from the US Strategic Petroleum Reserve and increased US oil production and refining capacity may prevent prices from reaching record levels. However, the OPEC+ cut of 1 million barrels per day will present challenges in making up for the loss in production.
At our financial services company, we understand the potential impact of fluctuating gas prices on small businesses and gig workers. That’s why we offer a fast and easy merchant cash advance (MCA) solution that provides the necessary financing to overcome any economic challenges. Eliminating the need for a credit check, our MCA solution gives contractors and other 1099 workers the peace of mind to focus on their work without worrying about credit obstacles. Contact us today to learn more about our MCA options and how they can help your business thrive.