BY MIKE NOLTING
The OPEC+ announcement to cut oil production by two million barrels per day (bpd) is already creating movement on world markets.
Senior Petroleum analyst for GasBuddy.com, Patrick Dehaan said on MetroNews “Talkline” Monday, the price of oil has already increased $10 per barrel on the announcement and that will push gas prices higher.
“I do suspect we’ll see prices jumping up maybe another 8 to 28 cents a gallon,” Dehaan said. “Meaning the total impact will be somewhere in the ballpark of 10 to 30 cents, so prices in West Virginia are likely to edge up and really the entire East Coast.”
The continual draw from the Strategic Petroleum Reserves (SPR) by the Biden administration has kept domestic oil prices at bay to this point. But, because OPEC+ has consistently fallen short of current production goals markets have never fully recovered from the pandemic.
“Overall oil inventories globally remain extremely tight, so to take 2% off the top doesn’t seem like a lot, but it is,” Dehaan said. “It’s the last breath you need until it gets vastly tight.”
President Biden traveled to Saudi Arabia earlier but was unable to get a firm production agreement from the Kingdom. Increasing supply will lower prices but will also decrease Russian revenue that can be used on the war in Ukraine.
“The president is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine,” the White House said.
“I don’t subscribe to too much of that political stuff because I look at markets and I can see what’s actually happens” Dehaan said. “But, some of this feels like there are some political undertones with Saudi Arabia still holding a grudge against the U.S. and trying to push oil prices up.”
Gov. Jim Justice blamed the Biden administration for the increase in energy prices by stopping pipeline construction and not pursuing domestic options. Justice said it’s clear we could help ourselves, but these decisions have left us energy dependent.
“Without any question sure, I think we should be absolutely energy independent in this country and there’s no reason on this planet why we’re not doing that except the Biden administration,” Justice said. “Absolutely, all of this inflation is driven by energy.”
Biden administration officials, including Secretary of the U. S. Department of Energy Jennifer Granholm, have called on oil companies and refiners to do more to lower gas prices for the last 18 months. In June, Biden referred to oil company profits as “not acceptable” and called on executives to do more to lower prices at the pump.
“I think the president made some mistakes in his early days in the Oval Office. Going after the oil industry, going after calling Saudi Arabia and calling them a pariah,” Dehaan said.” There are consequences to the word “chosen” and I think that’s coming home to roost.”
The next OPEC+ meeting will be Dec 4. OPEC+ will then move to meeting every six months instead of monthly.