Gas prices are painful these days; last year, many people complained about the U.S. national average per gallon price being $3.04. It now seems like a distant memory and one that would be preferable to the new AAA report of $4.62 average today. But there’s a chance we could be seeing some relief for our bank accounts in the future as the OPEC+ states have agreed to bring forward oil production rises to offset Russian output losses, according to Reuters.
OPEC+ Increasing Oil Production: Will Gas Prices Drop?
The increase in oil production will hopefully ease surging oil prices and inflation and will provide a smooth way for an ice-breaking visit to Riyadh by President Joe Biden. OPEC+ has said that it had agreed to boost output by 648,000 barrels per day (BPD) in July, which is 0.7% of global demand and a similar amount in August versus the initial plan to add 432,000 BPD a month over three months until September.
Western sanctions could reduce production from Russia, the world’s second-largest oil exporter, by as much as 2 million to 3 million BPD. A Western diplomat stated that Russia might be ready to agree with other members of OPEC+ to fill a gap in its output to preserve unity in the group and maintain support from the Gulf. However, the majority of OPEC+ members are already producing at maximum capacity. Saudi Arabia and the UAE are the only OPEC states with significant ability to produce more oil.
According to Amrita Sen, co-founder of Energy Aspects think-tank, the actual production boost over July-August would amount to around 560,000 BPD compared to the scheduled 1.3 million BPD since most members have already maxed out their production. This brings us to the importance of energy production in the U.S. According to Fox Business, former Energy Secretary Dan Brouillette has warned that if the Biden administration doesn’t increase oil production in the States, Americans will continue to see gas prices rise.
Brouillette suggests that the higher oil prices come from a lack of energy production in the United States compared to other parts of the world. In 2019, during the Trump Administration, the United States produced around 13 million BPD in the United States. Currently, we’re only making approximately 11.5 million. Additionally, the Biden administration has shifted the blame to oil companies for record-high gas prices but has been “disingenuous” about oil production in the States. Brouillette continued to say that America shouldn’t be transitioning from “one fuel source to another” but argued that the U.S. should take steps to produce “less energy to more energy.” When we produce more, we have a larger market supply, and prices will reduce.