- OPEC and its partners met on Wednesday at their headquarters in Vienna to discuss their biggest production cut since the beginning of the pandemic. They announced plans to cut around one to two million barrels of oil per day to halt precipitously falling consumer gas prices.
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The suggested cuts sparked controversy in the United States, where rising oil prices threaten Biden's opportunity for reelection ahead of mid-terms. The declining price of oil is expected to hurt the US economy and drive up pump prices for US drivers. Despite the US’s insistence on not proceeding with the cuts, Saudi Arabia and other members of OPEC+ are adamant as they aim to prevent price volatility rather than target a particular oil price.
- Fortunately, the US might not have a lot to worry about since the economic impact of production cuts is unclear. OPEC+ members are already unable to meet the production quotas, so they would be in compliance with the new capacity without having to cut down on existing production.
Why it matters
The US is seeking to halt production cuts by OPEC+ in order to keep prices low and hit revenues of Russia, the world’s largest oil exporter, in an attempt to counter its expansion in Ukraine. Additionally, if OPEC+ proceeds with its cuts, the US may have to resort to using its Strategic Petroleum Reserve to control prices.
