As that fuels inflation, people have less money to spend on other things like food and rent. That would exacerbate an energy crisis in Europe largely tied to Russian cutbacks of natural gas supplies used for heating, electricity and in factories and would send gasoline prices up worldwide. 'Higher oil prices will inevitably add to the inflation headache that global central banks are fighting, and higher oil prices will factor into the calculus of further increasing interest rates to cool down the economy,' he wrote in a note.

That's still going to have a “significant' effect on prices, Leon said. So the group can deliver only about 1.2 million barrels a day in actual cuts. Part of the 2 million-barrel-per-day cut is only on paper as some OPEC+ countries aren't able to produce their quota. That is up from an earlier prediction of $89. Brent crude should reach $100 per barrel by December, says Jorge Leon, senior vice president at Rystad Energy. WILL THE OPEC PRODUCTION CUT MAKE INFLATION WORSE? “It’s a disappointment, and we’re looking at what alternatives we may have,” he told reporters about the OPEC+ decision. That's 65 cents more than Americans were paying a year ago. Over the past week, the national average price for a gallon rose 9 cents, to $3.87. gasoline prices that soared to record highs of $5.02 a gallon in mid-June had been falling recently, but they have been on the rise again, posing political problems for President Joe Biden a month before midterm elections.īiden, facing inflation at near 40-year highs, had touted the falling pump prices. That could push costs at the pump higher, too. That could take more Russian oil off the market and push prices higher. Russia, however, has threatened to simply stop deliveries to a country or companies that observe the cap. The idea behind the price cap is to keep Russian oil flowing to the global market, just at lower prices. HOW WILL OIL CUTS, PRICE CAPS AND EMBARGOES CLASH? Many of those providers are based in Europe and would be barred from dealing with Russian oil if the price is above the cap. The EU approved a measure along those lines this week. It would target insurers and other service providers that facilitate oil shipments from Russia to other countries. and other Group of Seven major democracies are working out the details on a price cap on Russian oil. 5, while keeping a small amount of pipeline supplies that some Eastern European countries rely on.īeyond that, the U.S. In the end, the 27-nation bloc decided to cut off Russian oil that comes by ship on Dec. The White House held off pressing the European Union for an import ban because EU countries got a quarter of their oil from Russia. and Britain imposed bans that were mostly symbolic because neither country imported much Russia oil. That’s what happened during the COVID-19 pandemic in 2020 and during the global financial crisis in 2008-2009. Oil producers are wary of a sudden collapse in prices if the global economy goes downhill faster than expected. One big reason for the slide is fears that large parts of the global economy are slipping into recession as high energy prices - for oil, natural gas and electricity - drive inflation and rob consumers of spending power.Īnother reason: The summer highs came about because of fears that much of Russia's oil production would be lost to the market over the war in Ukraine.Īs Western traders shunned Russian oil even without sanctions, customers in India and China bought those barrels at a steep discount, so the hit to supply wasn't as bad as expected. Brent crude, the international standard, rose 2.8% to $97.09, though it's still down 20% from mid-June, when it traded at over $123 per barrel. crude rose 3.2% on Friday, to $91.31 per barrel.

Now, after the OPEC+ decision, they are heading for their biggest weekly gain since March. Oil prices had fallen after a summer of highs. “We are going through a period of diverse uncertainties which could come our way, it’s a brewing cloud,” he said, and OPEC+ sought to remain “ahead of the curve.” He described the group's role as “a moderating force, to bring about stability.' Saudi Arabia's Energy Minister Abdulaziz bin Salman says that the alliance is being proactive in adjusting supply ahead of a possible downturn in demand because a slowing global economy needs less fuel for travel and industry. Here is what to know about the OPEC+ decision and what it could mean for the economy and the oil price cap:

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