FRANKFURT (Germany) — The oil cartel OPEC, along with allied producing countries, is sticking to cautious increases in oil sent to the global economy. This decision will support prices which are at seven-year highs, amid fears about a Russian military strike against Ukraine.
Wednesday’s agreement by OPEC members, led by Saudi Arabia, and non-members led Russia, was to increase March’s oil production by 400,000 barrels. This is in line with the OPEC+ group’s plans to increase that amount of oil each month and slowly restore deep cuts made in the wake of the coronavirus pandemic of 2020.
This comes as oil prices remain at their highest level since 2014. This has pushed up gasoline costs for drivers. Oil in the United States rose 1.2% to $89.28 while Brent crude, an international benchmark, was at $90.09, an increase of 1%.
These high prices have created pressure to increase production from the U.S., other consuming nations, and in November, the U.S. announced a coordinated oil release from its national reserves. This step has not helped to reduce the rise in oil prices as the economy recovers from the pandemic, and uses more fuel for travel and industry.
OPEC+ will continue to stick to its plan, particularly since many members have not been able to meet their share. Higher oil prices have reverberations in the global economy in terms higher consumer inflation and driving costs.
According to AAA motor club federation, drivers in the United States are now paying $3.36 per gallon on average for gasoline. This is an 8-cent increase from a month ago, and 94 percent from a year earlier. German gasoline prices reached a new record of 1.71 euros per barrel, which is equivalent to $7.31 per gallon. The largest share of European gas prices is due to taxes.
The tensions in Eastern Europe have contributed to recent price increases. There are concerns about Russia and Ukraine and there is a risk that Russian oil supplies may be cut if U.S. diplomatic negotiations fail. European sanctions.
Russia is a major oil-and gas producer. Analysts believe that the U.S. would seek to provide spare energy supplies if sanctions are imposed.
Lagging oil investments have prevented some OPEC member nations, like Angola and Nigeria, from increasing their production. This raises the question as to whether other countries, such as Saudi Arabia, who are de facto OPEC leaders can make more.
OPEC+ is interested in stable price developments. While higher prices are good for state budgets in the producing countries, they may not be desired by members to see them rise to $100 per barrel. This could lead to a decrease in transportation demand.