The OPEC oil cartel and its allies decided Wednesday to boost production in September by a much slower pace than in previous months at a time of high gasoline prices and unstable energy supplies exacerbated by the war Russia has waged on Ukraine.
OPEC, led by Saudi Arabia, and its allies, led by Russia, said they will increase output to 100,000 barrels a day next month after raising it by 648,000 barrels per day in July and August. The group considered what effects staggering inflation and rising COVID-19 rates may have on global demand for fuel in the fall.
It comes after U.S. President Joe Biden visited Saudi Arabia last month, aiming to improve relations and encourage more oil production from the cartel to draw down high prices at the pump. While gasoline prices have been falling, they are still high and posing a political problem for him as inflation surges.
There was no oil production agreement announced after the meeting, but Biden said he expected OPEC to take steps to increase production in the coming weeks. Those hopes didn't materialize.
As a result, "the U.S. may go looking for other sources of oil, whether it’s Venezuela or Iran," said Jacques Rousseau, managing director at Clearview Energy Partners.
Biden's administration also is encouraging the U.S. oil and gas industry to increase production.
"You’ve just seen the second-quarter results from some of these companies. They are record profits," Amos Hochstein, a senior adviser for energy security at the State Department, said Wednesday on CNBC. "They should be investing those dollars right back into production increases."
The OPEC+ coalition had curtailed production during the pandemic as oil prices and demand plummeted, and those cuts are due to expire in September. The group has been gradually adding more oil and gas to the market as economies recovered.
Some OPEC nations, such as Angola and Nigeria, have been producing less than the agreed-upon amount. Saudi Arabia and United Arab Emirates, on the other hand, have the capacity to increase production.
OPEC's decision appears to be an attempt to appease those countries that can't produce more, Rousseau said.
"Any time you increase the target, there’s countries that can’t participate," he added. "If you only raise production by 100,000 barrels per day, that’s just a small piece for everybody."
As a result, the amount of oil on the market might not keep up with demand, so high oil prices may persist for some time.
The price of oil rose sharply after Russia invaded Ukraine in February. It fell somewhat since OPEC last met but rose modestly Wednesday. A barrel of U.S. benchmark crude was selling for just over $94 Wednesday, compared with more than $105 per barrel a month ago. Brent crude, the international standard, was selling for just over $100 a barrel Wednesday, also down about $110 from a month ago.
Russia's oil and natural gas exports to the world have declined as many nations imposed sanctions or curtailed buying from the major supplier due to its invasion of Ukraine. Russia also has reduced or cut off natural gas to a dozen European countries, further driving up energy prices, squeezing people's spending power and threatening to cause a recession if nations can't stockpile enough gas to get through the winter.
It was the first official monthly meeting of the OPEC+ group since its leader, Mohammad Sanusi Barkindo, died at age 63 in his home country of Nigeria last month. Haitham al-Ghais, a veteran of the Kuwait Petroleum Corporation, took over as secretary general of OPEC this week.
In the U.S., a gallon of regular gasoline was selling for $4.16 on average Wednesday. That’s substantially lower than in June, when the nationwide average surpassed $5 a gallon, but it’s still painfully high for many frontline workers and families to afford and about 31% higher than what drivers were paying a year ago.