How will OPEC decision affect gas prices?

Gas Station Fuel Pump
Posted at 9:42 AM, Oct 17, 2022

GREAT FALLS — Early this week, OPEC+ announced it plans to slash production by about two million barrels of oil per day starting in November. If the proposed plan sticks, the price for a barrel of oil could raise to $90 per barrel. A price that could affect the world commodity market.

It’s a complex issue, that starts at the top.

“What is the Biden administration going to do? What is Congress going to do?” Alan Olson said, Executive Director of the Montana Petroleum Association.

Added pressure from legislators is stress to crude oil producers.

“Joe Biden was running for president. He said that he will shut down the oil and gas industry. I mean, that sends a signal,” said Olson.

Since 2020, oil refineries in Montana have lost over one million barrels of refining capacity.

“Crude oil prices represent about 60% of what you pay at the pump. So if you see oil go up, chances are your gas is going to go up,” said John Treanor, a Spokesperson for AAA’s Northwest region.

It isn’t as easy to predict what drivers can expect to pay at the pump come Winter.

“Control in supply and demand is very important. It's all very high-level stuff. But that is how the oil industry really dictates how good for the market gets,” told Treanor.

Following OPEC’s announcement, President Biden plans to release one million barrels of crude oil from the nation’s strategic petroleum reserve, to combat supply chain issues.

In a report from USA Today, Patrick De Haan, head of petroleum analysis at GasBuddy, “the West Coast, Great Lakes, and plains, meanwhile could see prices drop as refinery issues in the area improve. But with OPEC+ cutting production, prices may not go down as much as they could have otherwise… ‘Everyone’s gonna feel the impact to the tune of 10 to 30 cents,’ De Haan said.”

“If it appears that production cut is already occurring because OPEC's members were unable to meet production quotas. So, part of the reason that they cut the proposed number of barrels that were going to be produced was because they had trouble meeting quotas. Well, that means that the pricing impact could be short lived,” said Treanor.

This is all part of an administrative and nationwide effort to create a greener and more renewable America.

“…when the securities and Exchange Commission wants to look at environmental and social justice programs for producing companies, that sends a signal,” shared Alan Olson.

Tougher regulations on oil producers and land holders are adding to the strain in the fossil fuel business. Olson has an important message for leaders in the United States.

“Biden can't shut us down and then expect OPEC to make up the difference,” adding, “. You don't tear down the house you're living in until the new house is built. But that's what they're trying to do.”