The OPEC+ alliance announced Wednesday that it will cut oil production by 2 million barrels a day, a move that's likely to send gas prices higher again after a year of tumult at the pump.
In its statement announcing the cuts, the OPEC+ alliance cited the "uncertainty that surrounds the global economic and oil market outlooks.”
It represents the largest cut in production since the start of the pandemic.
In a statement, the Biden administration said it was disappointed in the decision, calling it “shortsighted” in light of global energy prices already lifted higher by Russia’s invasion of Ukraine.
“At a time when maintaining global supply of energy is of paramount importance, this development will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” it said.
The decision by the oil cartel and its allies, announced in Vienna, comes after the price of oil and gas spiked this summer amid the Russian invasion of Ukraine. Prices trended downward from July to mid-September, as President Joe Biden sought to reduce gas prices, and stress on Americans’ wallets, ahead of the midterm elections.
Capital Economics research group now expects global oil prices to rise from about $93 to $100 per barrel, with U.S. benchmark prices rising from $88 to $92. At the outset of Russia's invasion of Ukraine, global oil prices had climbed to as much as $128.
"We had always expected supply growth to slow later this year and into 2023, but this latest OPEC+ action has re-enforced our view that prices will end the year a little higher," Caroline Bain, chief commodities analyst for Capital Economics, said in a note following the Wednesday announcement.
U.S. gas prices had already been trending higher in recent weeks amid increased demand and refinery issues in the U.S. The average price of a gallon of gas on Wednesday was $3.83, the highest since late August.
“The regional differences in gas prices are stark at the moment, with prices on the West Coast hitting $6 a gallon and higher, while Texas and Gulf Coast states have prices dipping below $3 in some areas,” Andrew Gross, an AAA spokesperson, said in a statement Monday.
At least six California refineries are undergoing maintenance, Gross said, and there is limited pipeline supply to the West Coast from locations east of the Rockies.
Political analysts have observed a strong correlation between gas prices and Biden's approval rating, as voters home in on gas prices as a proxy for inflation and thus the state of the economy.
Wall Street analysts say the Biden administration could counter OPEC's move by releasing stocks from the U.S.'s strategic petroleum reserve, and even boosting the so-called NOPEC bill that would penalize other oil producing states by opening them up to antitrust suits.
OPEC+, whose de facto leader is Saudi Arabia, is comprised of 13 oil-exporting countries and 11 nonmember allied countries, including Russia.