The alliance of OPEC members led by Saudi Arabia and
non-members led by Russia agreed Wednesday to add 400,000 barrels per day in
March. That is in line with plans by the OPEC+ group to add that amount of oil
every month and gradually restore deep cuts made during the depths of the
coronavirus pandemic in 2020.
The move comes as oil prices hover near their highest levels
since 2014, pushing up gasoline costs for drivers. U.S. oil traded up 1.2% at
$89.28, while international benchmark Brent crude was priced at $90.09, up 1%.
Prices at those levels have led to pressure for more
production from the U.S. and other consuming countries, which in November
announced a coordinated release of oil from national reserves, a step that has
not done much to curb the increase in prices as the economy bounces back from
the pandemic and consumes more fuel for travel and industry.
OPEC+ sticking to its plan will support oil prices,
especially since several members have been unable to meet their share of
output. Higher oil prices are sending reverberations throughout the global
economy in terms of higher consumer inflation in the U.S. and Europe and
costlier fuel for heating, flying and driving.
U.S. drivers are paying an average of $3.36 per gallon for
gasoline, up 8 cents from a month ago and 94 cents from a year ago, according
to motor club federation AAA. In Germany, gasoline prices hit a record 1.71
euros per liter, the equivalent of $7.31 per gallon. Taxes make up a larger
proportion of gas prices in Europe.
Recent price rises also have been fed by the tensions in
eastern Europe, where uncertainty around Russia and Ukraine has raised fears
that Russian oil supplies could be interrupted if diplomatic talks break down
and U.S. and European sanctions materialize.
Russia is a major oil and gas producer. Some analysts think,
however, that any sanctions imposed by the U.S. and Europe would seek to spare
energy supplies.
Some OPEC member countries, such as Nigeria and Angola, have
been unable to ramp up production due to lagging oil investment. That raises
the question of whether countries that can produce more — such as de facto OPEC
leader Saudi Arabia — can fill the gap.
OPEC+ has a stake in stable price developments: While higher
prices benefit state budgets in producing countries, members may not want to
see them shoot to levels over $100 per barrel, when they might begin to erode
demand from transportation and industry.
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