Will OPEC Production Cuts Bring Gas Prices Back Up?

September 7, 2022 Topic: Gas Prices Region: United States Blog Brand: Politics Tags: OPECGasBuddyGas PricesOilU.S. Economy

Will OPEC Production Cuts Bring Gas Prices Back Up?

OPEC just announced plans to cut oil production by 100,000 barrels per day.

After dropping throughout the summer, U.S. gas prices have continued plunging past Labor Day. 

According to Gas Buddy’s weekly report, the average price of gasoline in the United States has dropped for twelve weeks in a row, from highs of around $5 a gallon in the spring. The average is now $3.75 per gallon, down 7.7 cents from a week earlier, representing a 29.5 cent drop from a month earlier. 

“The national average has declined for 12 straight weeks, the longest tally since 2018, and it could soon eclipse that mark if we see two more weeks of decline. Though, that may be more challenging given OPEC’s decision yesterday to cut oil production,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in the release. 

“For now, price movements will be contingent on where you are, with California seeing some minor increases, while the Great Lakes could see an upward move as BP’s refinery outage has had an impact on supplies. In the Gulf and Rockies, prices may continue to fall, so a very mixed bag for motorists in the week ahead. In addition, there are several disturbances in the Atlantic to keep an eye on, but we do switch back to cheaper winter gasoline in just over a week which should provide some additional relief,” De Haan continued.

De Haan also noted that OPEC had announced plans to cut oil production by 100,000 barrels per day. Before the holiday, GasBuddy said that gas prices had declined every week of the summer.

“It was a dizzying time as gas prices surged ahead of summer, which caused many Americans to re-think their summer travel plans, only for the longest decline in gas prices since the pandemic to start providing meaningful relief,” De Haan said in last week’s report. “As the sun sets on summer, gas prices are in far more familiar territory and could continue to decline well into fall, barring major disruptions from hurricanes and the likes.” 

CNBC reported Tuesday that gas prices could drop below $3 this fall. 

“Consumers have been unbelievably lucky. All the worst fears have not materialized,” John Kilduff, partner with Again Capital, told CNBC. “This is putting a lot of money back in people’s pockets… it gives people some relief and the economy some relief. It’s like a huge tax cut for consumers.”

Tom Kloza, head of global energy analysis at Oil Price Information Service, also predicted a similar direction for gas prices.

“Prices on balance are going to be relatively palatable for the rest of the year,” he said. “There’s too many things that could cause a wobble higher.”

Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters.