The oil cartel OPEC+ has agreed to extend its oil production cuts, a move that could lead to higher energy prices in the U.S. just months before the 2024 presidential election. According to Reuters, OPEC+ will prolong its existing production cuts of 3.66 million barrels per day through the end of 2025 and extend additional cuts of 2.2 million barrels per day until September 2024.
OPEC, which includes major oil-producing countries like Saudi Arabia, Kuwait, the United Arab Emirates, Libya, and Venezuela, along with allies such as Russia, is currently reducing production by about 5.8 million barrels per day. This volume accounts for roughly 5.7% of global demand. The extension of these cuts could create a supply deficit in the global market, likely resulting in higher oil prices through the upcoming presidential election extended.
The Biden administration is reportedly concerned about the potential rise in energy costs as the election approaches. In response, the Department of Energy (DOE) has announced a plan to release 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve to help control pump prices. John Podesta, a senior climate adviser to President Biden, has also mentioned the possibility of further drawdowns from the Strategic Petroleum Reserve (SPR) if deemed necessary.
Amrita Sen, co-founder of Energy Aspects, an energy-focused think tank, said, “The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife. It should be seen as a huge victory of solidarity for the group and [Saudi Arabian Energy Minister Prince Abdulaziz bin Salman Al Saud].”
The extension of production cuts by OPEC+ was anticipated by market analysts, given the recent trend of falling prices and tepid demand. The move underscores the cartel’s influence on global oil markets and its ability to impact energy prices significantly.
The White House and the DOE have yet to comment on the OPEC+ decision. As the U.S. heads towards a critical election, the administration’s handling of energy prices and the broader economic implications will be closely watched by voters and analysts alike.
OPEC+’s decision to maintain reduced production levels through a critical election period could pose significant political and economic challenges for the Biden administration. The situation underscores the intricate balance between energy policy and economic stability, particularly in the context of global oil market dynamics.
