- Key OPEC nations are weighing a halt to efforts to ramp up oil production, the WSJ reported.
- It comes a day after the US and other nations announced they’d be tapping strategic oil reserves to relieve high prices.
- The brewing rivalry could keep gas prices at 7-year highs.
A new rivalry is brewing in the oil market, and its keeping gas prices at seven-year highs.
Saudi Arabia and Russia are weighing a pause to their efforts to supply more crude oil, the Wall Street Journal reports. The two countries are influential members of the Organization of Petroleum Exporting Countries (OPEC). The international cartel initially planned to boost oil production through the end of the year as economies reopened. A pause would bring new tension to the global oil market and almost certainly leave gas prices at their current highs.
The report comes only a day after the US and other countries like China and Japan announced they’d be tapping into their strategic reserves of crude oil in a bid to control rising gas prices. President Joe Biden said on Tuesday the US would release 50 million barrels from the Strategic Petroleum Reserve, an underground oil stockpile currently holding some 600 million barrels. China, South Korea, India, and Japan also announced releases of their own.
“We’re launching a major effort to moderate the price of oil, an effort that will span the globe and its reach and ultimately reach your corner gas station,” Biden said.
The US had tried pressuring the Saudi-led Organization of Petroleum Exporting Countries (OPEC) to ramp up production as the cost of gas hit $US3.40 ($AU5) this week, according to AAA. Gas prices have risen markedly compared to a year ago with demand surging due to a reopening of the economy.
Yet OPEC refused Biden’s call for more production earlier in November, arguing another virus variant or unforeseen crisis could weaken oil demand like the Delta variant did. With key OPEC members mulling even slower production and other countries tapping their reserves, the global energy market is splitting into two factions with dramatically different goals.
Not all OPEC countries are aligned with Russia and Saudi Arabia in wanting to pause production hikes. The United Arab Emirates isn’t convinced that freezing the planned increases is necessary, WSJ reported. Kuwait is also opposed to a pause.
Biden is facing mounting criticism from Republicans on the rising cost of groceries and gas ahead of the Thanksgiving holiday. Gasoline costs have played a major role in the higher inflation hammering Americans, with prices climbing 6.1% in October alone. Though the economic recovery is progressing well, soaring prices have dragged Americans’ outlooks to the lowest level in a decade.
The White House has said it’s open to releasing more oil from its underground stockpile. But with OPEC hinting it could withhold supply for longer than expected, the US could be in for a prolonged battle over soaring gas prices.