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The Organization of Petroleum Exporting Countries, along with Russia and other oil producers, on Wednesday slashed production by 2 million barrels a day, an action that could help Moscow pay for its war with Ukraine and hurt U.S. President Joe Biden’s chances to further cut gasoline prices for American motorists.
The production cut was seen as a rebuke to Biden, who visited Saudi Arabia in July in what now has turned out to be a futile effort to persuade the world’s second-biggest oil producer after the United States to refrain from cutting production.
White House officials assailed the decision in Vienna by the 23 countries that belong to the OPEC+ coalition, which analysts say could increase the risk of a global recession in the coming months. Crude oil prices had been falling for months on the world market but had risen in recent days in anticipation of the OPEC production cut.
White House national security adviser Jake Sullivan and National Economic Council director Brian Deese said in a statement that the president “is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of [Russian President Vladimir] Putin’s invasion of Ukraine.
“At a time when maintaining a global supply of energy is of paramount importance,” Sullivan and Deese said, “this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices.”
Effective in November
The OPEC+ coalition said the production cut, from 43.8 million barrels a day to 41.8 million, would take effect in November. It is the first time OPEC has cut oil production targets since the beginning of the coronavirus pandemic in March 2020, although the coalition has been undershooting its target by 3 million barrels a day this year.
Because of the underproduction of the oil-producing countries, White House national security spokesman John Kirby played down the new OPEC+ agreement.
“So, in some ways, this announced decrease really just kind of gets them back into more aligned with the actual production,” he said.
Even so, the oil producers are hoping to curb the drop in world crude prices, which surged past $100 a barrel earlier this year but had fallen 32% in the last four months before increasing to more $93 a barrel on Wednesday after the OPEC announcement.
With the drop in the price of crude over the summer months, gasoline station pump prices fell in the U.S., which in turn boosted Biden’s job approval rating as the country heads to nationwide congressional elections next month.
A year ago in the U.S., gas station prices averaged $3.20 a gallon (3.78 liters) and in some states fell to near that low in recent months. But now, with crude oil prices on the rise again, the national average is at $3.83 a gallon, according to the American Automobile Association.
With Biden’s Democratic Party holding narrow control of both the House of Representatives and the Senate, and some pollsters predicting a Republican takeover of the House and possibly the Senate, White House officials are concerned about any increase in gasoline pump prices being blamed on Democrats, giving Republicans an electoral boost.
In addition, Russia relies on gas and oil sales for a large portion of its budget to help fund its war in Ukraine. It supported the production cut, which will enable Moscow to sell oil for higher prices on the global market.