In a twist that could impact your daily commute and road trip plans, gas prices are on the cusp of a significant surge following Saudi Arabia’s recent decision to curtail oil production by a staggering 1 million barrels per day.
As the average U.S. driver currently enjoys paying around $3.55 for a gallon of regular gasoline, this is over $1 lower compared to prices just a year ago. However, brace yourselves for an impending change.
Patrick De Haan, the sharp-witted head of petroleum analysis at GasBuddy, warns that oil prices might rally in response to these production cuts, leading to a rapid upswing in gasoline prices by the middle of the week. While the duration of this price surge remains uncertain, De Haan assures motorists that any increase in average prices should be relatively modest, dispelling concerns of reaching record-breaking figures in the near future.
This game-changing announcement by Saudi Arabia was made on a significant Sunday, unveiling plans to reduce oil production to 9 million barrels per day in July, down from the previous output of 10 million barrels per day in May. The decision, labeled a “Saudi lollipop” by Saudi Energy Minister Prince Abdulaziz, is intended to introduce an element of suspense and avoid predictability, all while striving for market stabilization.
To achieve this goal, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have adopted an ambitious strategy. They have committed to limiting oil supply until 2024, aiming to rejuvenate slumping oil prices and restore balance to the industry.
With OPEC+ accounting for an astonishing 40% of global crude production, this alliance has collectively slashed output targets by a monumental 3.66 million barrels per day. This translates to a 3.6% reduction in global demand, encompassing an agreement for 2 million bpd reached last year, along with additional voluntary cuts of 1.66 million bpd implemented in April.
As we navigate through the turbulent seas of the energy market, be prepared for a sudden and significant surge in gas prices. The impact of Saudi Arabia’s oil production cut is poised to ripple across the nation, affecting the wallets of drivers everywhere. Stay informed and attentive, as the fluctuating price at the pump could leave a noticeable dent in your budget.
