OPEC+ FAQ: Why the production cuts; will gas prices go up?

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(NewsNation) — The White House is scrambling to address an expected surge in gas prices after the group of oil-exporting counties known as OPEC+ announced an agreement to cut oil production by two million barrels a day, which is expected to inflate gas prices 32 days ahead of the midterm elections.

National gas price averages had already started rising: AAA reported the current average was at $3.87, up nearly 10 cents from the week prior.

President Joe Biden called the decision a, “Disappointment and we’re looking at what alternatives we may have.” He now faces a tangled web to try and curb increasing prices at the pump while maintaining his environmental agenda set in the early days of his presidency.

DOES THIS MEAN gas prices WILL go up?

The short answer is, it’s unclear, and it depends on where you live.

Gas price expert Patrick De Haan said on Twitter locations where gas has been below $3 per gallon may see those prices cross over the dollar mark, but increases will be reserved for the “East Coast, South, Northeast, Rockies potentially,” adding there may be price drops in the West Coast, Great Lakes and Plains regions.

Prices have crept up over the last week (including days before the OPEC+ announcement) especially out west in states like California ($6.36 per gallon average), Oregon ($5.47 per gallon average) and Washington ($5.33 per gallon average), according to Gas Buddy.

There’s more to it than OPEC+’s decision. Refineries in California are under maintenance, and a deadly explosion at an Ohio refinery also led to a decrease in domestic production.

The California refineries are expected to be back up and running soon, and the state is authorizing the use of a winter blend of gasoline one month earlier than normal that’s cheaper to produce.

Prices could still rise, or potentially level out, based on the OPEC+ decision.

MIDTERM BLAME GAME

Republicans have attacked the president and fellow Democrats on inflation, with gas prices playing a large role. The Biden administration enjoyed lower prices through the summer, but renewed hikes give the GOP more ammunition heading into November.

Inflation remains the top issue for voters one month away from the mid-term elections, and the GOP has made it a top campaign issue, according to the most recent NewsNation/Decision Desk HQ poll.

Meanwhile, the White House has pointed the finger at big oil companies, warning them not to price-gouge following Hurricane Ian and trading barbs over the companies exporting oil instead of keeping it in the country.

White House officials said Thursday the gap between wholesale and retail has widened, adding they would consult with Congress on additional measures.

Pundits are calling the OPEC+ announcement a political blow for the president, particularly after he traveled to Saudi Arabia — the top oil exporter in OPEC+ — back in June, asking the crown to increase production.

Republicans are tapping into public anger over inflation this election cycle, an issue that spans across both political parties.

“Joe Biden caused this crisis with his destructive energy policies and foreign policies. I’m deeply disappointed by the Saudi decision and wish they would act more like an ally during current conditions, but this is Joe Biden’s fault,” Sen. Ted Cruz (R-Texas) told Axios Thursday.

Early in his administration, Biden signed an executive order to “pause” oil and gas permits on federal lands and blocked a presidential permit needed to finish the Keystone XL pipeline that would carry crude oil from Western Canada to the Gulf Coast, part of his campaign promise to address climate change.

He’s since told oil producers authorized to use federal land to “Use the permits or lose them.”

On Thursday, the White House released 10 million barrels released from the nation’s reserve, in addition to the 180 million already released this year.

WHY DID OPEC+ CHOOSE TO DECREASE PRODUCTION?

The oil production group met this week face-to-face for the first time since the pandemic, to reduce production and boost the price of oil amid uncertainty across the globe.

Much of the global uncertainty surrounding oil production stems from the Russian-Ukraine War. OPEC made that production announcement ahead of expected Russian energy embargoes from the European Union, according to Al Jazeera.

Russia is not one of the original 13 OPEC members but part of the additional 10 counties that make up OPEC+. When Russian forces invaded, the price of crude oil jumped over $100 a barrel and the markets were concerned sanctions against Russia would lead to a shortage.

The price has dropped since the initial invasion, which prompted the production decrease.

What’s Venezuela got to do with it?

The White House is considering loosening sanctions on Venezuela to allow Chevron to pump oil once again, according to the Wall Street Journal.

The WSJ reports Venezuela once pumped 3.2 million barrels a day in the 1990s, but mismanagement and corruption brought down the state-run industry, which received a second blow after sanctions brought on by the Trump administration forced Western companies out of Venezuela.

Venezuelan President Nicolás Maduro would resume talks with opposing political groups about fair elections in the country, in exchange for sanctions relief.

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