Rewakening the ‘inflation monster,’ OPEC+ moves to send US gas prices higher

OPEC and its allies have delivered a surprise blow to the global energy market, announcing a significant reduction in oil production that threatens to drive up gasoline prices for American consumers. The coalition, known as OPEC+, revealed on Sunday that it will slash output by more than 1.6 million barrels per day starting in May and continuing through the end of the year. This unexpected move triggered an immediate market reaction, with both Brent crude and West Texas Intermediate (WTI) futures surging approximately 6% during Monday's trading sessions.

The impact of this decision was felt instantly in the wholesale gasoline market, where RBOB gasoline futures climbed by about 8 cents per gallon, or 3%. Tom Kloza, global head of energy analysis for OPIS, warned that this policy shift effectively reawakens the inflation monster that policymakers have been struggling to tame. While the White House has not yet issued a formal detailed response, industry analysts suggest that the administration is likely deeply frustrated by a move that fundamentally alters the economic calculus for the coming months.

Historically, oil markets have been highly sensitive to OPEC+ production quotas, especially following the volatility seen after Russia’s invasion of Ukraine. A year ago, the national average for regular gasoline in the United States reached a staggering $4.19 per gallon, eventually peaking at a record $5.02 in June 2022. That period of extreme pricing was driven by global supply chain disruptions and geopolitical instability, which only began to subside after months of steady decline supported by the release of oil from the US Strategic Petroleum Reserve.

For the average American driver, the ramifications of this production cut are becoming clear as the national average price currently sits at $3.51 per gallon. Experts like Kloza predict that prices could climb toward the $3.80 to $3.90 range in the near term. While this is unlikely to reach the record highs of 2022, the upward pressure is significant. Furthermore, if the summer season brings extreme weather events, such as hurricanes along the Gulf Coast, the disruption to refining capacity could exacerbate these price hikes, placing additional strain on household budgets.

Looking ahead, the outlook remains cautious as the global energy landscape faces renewed supply constraints. Although the United States maintains higher domestic production levels and plans for additional releases from the Strategic Petroleum Reserve to mitigate volatility, the sheer scale of the OPEC+ cut—1 million barrels per day—will be difficult to offset completely. Analysts emphasize that OPEC+ has demonstrated both the capacity and the clear motivation to manipulate supply to support higher prices, signaling a challenging period for global energy markets and inflationary control efforts throughout the remainder of the year.