OPEC Move Is Not Worth Biden’s Hype, And Won’t Stop Record Gasoline Prices

Another day, another record for gasoline prices, which hit an average of $4.715 a gallonin the United States. That’s up 50% in a year and double what they were when President Joe Biden took office in January 2021. At current daily demand of 8.9 million barrels (374 million gallons), that means Americans are paying nearly $900 million more at the pump, every day.

So it wasn’t surprising when a White House spokeswoman Karine Jean-Pierre this morning cheered “the important decision from OPEC+ today” to ostensibly increase its oil exports by 650,000 barrels per day over each of the next two months. This instead of the 430,000 bpd per month rate of supply increases that the cartel had planned for the next three months. 

More oil faster is good news right now. Unfortunately, behind the headlines, OPEC’s move is less momentous than it seems. That’s because the group has already shown itself unable to live up to its existing post-pandemic plan to return oil supply to the market. For a year OPEC has been restoring the deep cuts of 10 million bpd (nearly a third of output) made in 2020 when lockdowns kept cars and planes parked, sending oil prices to zero. But many OPEC members like Libya, Venezuela and Nigeria appear already maxxed out. Beset by internal strife and years of underinvestment, they are already pumping all they can, but not enough. According to Argus data, OPEC is underperforming quotas by more than 1 million bpd.

And then there’s Russia. Though an unofficial cartel member, Russia (the “+” in OPEC+) has been strategizing with OPEC since the pandemic. OPEC included Russia in its updated quota schedule released today, which calls for Russia to pump 10.8 million bpd in July. This is fantasy, considering that OPEC data shows that Russia produced just 9.16 million bpd in April, dropping precipitously from more than 10 million bpd in March. Even if the war in Ukraine ends today, the die is cast: western oil giants have fled Russia with their know-how, the European Union this week approved a ban on Russian oil which will cut another 1.5 million bpd of Russian oil demand, and insurers are balking at underwriting Russian tankers (which Putin can’t get enough of anyway). The IEA says 3 million bpd of Russian oil could be off the market by end of year.