Prior to OPEC+’s announcement that it would substantially reduce oil supply, gas prices in the United States were already high. Nevertheless, a greater chance of price increases comes with the choice.
Americans who are already trying to make ends meet due to growing inflation and the oil crisis are being shaken by this, causing waves of panic.
According to AAA, the price of oil rose by 3 cents per gallon on Wednesday, making it $3.83 a gallon now. The country’s oil prices rose by the most on this single day ever. Gas prices decreased from June to September, which was excellent news for individuals and companies that rely significantly on gas to operate. The trend, nevertheless, ceased after 99 days.
After then, oil prices increased. Recent events ought to modify them despite the slow and minor adjustments. The production of gasoline will be curtailed by 2 million gallons per day by oil cartels and other oil-producing nations, or around 2% of the total amount of oil available on the planet.
With a current increase of 2%, the future of oil is therefore facing an increasing trend. The situation can worsen.
Tipping to the bad side
The OPEC action has absolutely no positive effects on the world economy. Most of the time, it does nothing but makes things worse and bring the world economy one step closer to entering a recession. Due to OPEC’s decision, several US refineries are closing for maintenance work, according to Tim Kloza, the global head of OPIS. Around 18% of the US refineries are now not in use.
“A lot of it was put off in spring because they were making so much money. The margin of error in US refining capacity is so slim right now that you can’t lose any capacity without affecting prices,” he said.
Kloza did add, though, that California’s initiatives to increase oil output and consumption might lower oil prices. However, it can only occur if its implementation will not be impacted by OPEC’s most recent action.
“I don’t think we’ll see major moves in national prices. Even if we see California prices come back to the pack,” he said.
The cost of commodities always rises as gas prices increases. Therefore, as they prepare for an impending anomalous rise in the pricing of goods and commodities, consumers will be less likely to purchase market products. Additionally, the US economy’s general gloominess and the state of enterprises are both visible, impacting investors looking to make new investments.
Democrats are negatively impacted
Biden’s candidacy will suffer as a result of OPEC’s action. The drop in oil prices has long been a boon for Democrats, who have utilized it to their advantage in elections. As the world enters a recession, a key component of the Democratic campaign is their pledge to make life simpler for consumers. A pledge that could help them win the day is a reduction in oil prices. Biden worries that the changed circumstances could have an impact on voters’ perceptions.
Because of this, Biden and his allies have underlined calls made to OPEC members to change their decision and maintain the current output amount it is enforcing, particularly now that the winter and holiday seasons are rapidly approaching.
Photo Credit: Jeff Chiu