Oil Production Cut Sparks Concerns Over Rising US Gas Prices
A surprise move by OPEC+ to slash oil production by over 1.6 million barrels a day starting in May has sent shockwaves through the energy market, with US gas prices set to feel the impact. The news saw Brent crude futures and WTI, the US benchmark, jump about 6% on Monday, while gasoline futures surged by around 3%.
According to Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA, OPEC's decision is likely to "reawaken the inflation monster" and put pressure on the White House. Kloza estimates that US gas prices could reach $3.80 to $3.90 in relatively short order, pushing them further above current levels.
The cut in oil production is expected to have a more immediate impact on gasoline futures than oil prices themselves, with RBOB, the most closely watched wholesale gasoline price, up about 8 cents a gallon or around 3% in morning trading. The average US regular gas price has already fallen from its year-earlier peak of $4.19 a gallon following Russia's invasion of Ukraine and the subsequent energy market disruption.
However, Kloza notes that the US Strategic Petroleum Reserve (SPR) plans to release additional oil, which will help keep prices from reaching record levels seen in 2022. Nevertheless, he warns that a cut of this magnitude is not easy to offset, and the impact on gas prices could be significant.
Kloza also suggests that while US gas prices may not reach $5 a gallon, they could potentially rise above pre-pandemic levels if there are disruptions to production along the Gulf Coast, such as hurricanes. By the end of summer, Kloza believes US drivers could see prices return to year-earlier levels, especially if oil production is affected by external factors.
With OPEC's move set to have a lasting impact on the energy market, the question on everyone's mind is: how long will this supply cut hold, and what are the implications for US gas prices?
A surprise move by OPEC+ to slash oil production by over 1.6 million barrels a day starting in May has sent shockwaves through the energy market, with US gas prices set to feel the impact. The news saw Brent crude futures and WTI, the US benchmark, jump about 6% on Monday, while gasoline futures surged by around 3%.
According to Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices for AAA, OPEC's decision is likely to "reawaken the inflation monster" and put pressure on the White House. Kloza estimates that US gas prices could reach $3.80 to $3.90 in relatively short order, pushing them further above current levels.
The cut in oil production is expected to have a more immediate impact on gasoline futures than oil prices themselves, with RBOB, the most closely watched wholesale gasoline price, up about 8 cents a gallon or around 3% in morning trading. The average US regular gas price has already fallen from its year-earlier peak of $4.19 a gallon following Russia's invasion of Ukraine and the subsequent energy market disruption.
However, Kloza notes that the US Strategic Petroleum Reserve (SPR) plans to release additional oil, which will help keep prices from reaching record levels seen in 2022. Nevertheless, he warns that a cut of this magnitude is not easy to offset, and the impact on gas prices could be significant.
Kloza also suggests that while US gas prices may not reach $5 a gallon, they could potentially rise above pre-pandemic levels if there are disruptions to production along the Gulf Coast, such as hurricanes. By the end of summer, Kloza believes US drivers could see prices return to year-earlier levels, especially if oil production is affected by external factors.
With OPEC's move set to have a lasting impact on the energy market, the question on everyone's mind is: how long will this supply cut hold, and what are the implications for US gas prices?
. They're basically playing with fire by cutting oil production so drastically. It's gonna put a serious squeeze on the global energy market, and I mean that in more ways than one 
. The US is already seeing increased prices just from the announcement, and it's only May. By the summer, we could be looking at $4+ per gallon if things don't get back under control 
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. If OPEC+ sticks to their guns and keeps production levels in check, we might see a bit of stabilization by the end of summer. Fingers crossed for that!
, it feels like they're just reacting to everything going on in the world right now. $3.80 to $3.90 a gallon is kinda rough, but i mean, we've been there before too 
. remember when the pandemic hit and gas prices skyrocketed? yeah, those were crazy times 
. anyway, i'm keeping an eye on this situation because if it does affect gasoline production, it could get real messy 
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it's like, what happened to the extra oil released by the spr? doesn't seem like enough to offset this huge cut... and then there's the possibility of hurricanes affecting gulf coast production... that's just asking for trouble 
. The SPR releasing more oil might help, but I'm not buying it 
by summer.
. I'm thinking we're looking at $3.80-$3.90 per gallon for regular gas? That's crazy expensive! 
We've already seen prices drop after Russia's invasion of Ukraine, so it's not like this is out of the blue. But still, 6% jump in Brent crude and WTI futures? Yikes! 
. That's a double whammy for US drivers. I hope Kloza is right that prices will return to normal levels by then, but I've got my doubts 
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come on, 3.80 to 3.90 per gallon? that's just crazy! i remember when i was in college, usd per gallon was like 2.50, can you believe it's been over a decade and we're still paying more than triple what we used to?! 
. What's next? Prices going back up to pre-pandemic levels? No way 
. And what about the SPR releasing more oil? That's like pouring water on a fire 
- it won't last long. Mark my words, gas prices are gonna be through the roof in no time 
so next time u need a bag to buy some stuff, grab one of these instead of buying another plastic bag! 
. still, can't help but think of all the extra cash people will be shelling out for gas... maybe we'll just have to get creative with our road trips 
what do you guys think will be the real challenge here?
. What's up with OPEC+ making these cuts? Are they trying to make us all go electric or something? 
I just wanna fill 'er up without breaking the bank 