OPEC+ cuts oil production despite US objections, deepening the global energy divide
Uh-OPEC… The world’s largest coalition of oil-producing countries just dealt the rest of the world a doozy: yesterday, OPEC, Russia, and other allies agreed to curb oil production by 2M barrels a day — the biggest cut since 2020. It’s a blow to President Biden, who’d asked OPEC members to boost production to lower US gas costs.
- Sharp reversal: OPEC+ slashed production during lockdown as demand dropped. Then the group ramped up production as the global economy reopened.
- Putin pleaser: While oil prices did spike after Russian President Putin’s invasion of Ukraine, they’ve fallen more than 30% in the past four months on recession fears. After yesterday’s announcement, prices are rising again — helping OPEC+ members (including Russia) but hurting consumers.
Bundle up… it could be a cold winter. European energy prices have set records this year after Russia suspended EU gas deliveries. So EU countries are capping oil companies’ revenues, trying to reduce energy demand, and launching relief funds to offset the rising cost of fuel. Meanwhile, oil giants are pumping huge profits:
- $hell: Last quarter Chevron, Shell, TotalEnergies, and ExxonMobil posted a combined record $51B in profits. Saudi juggernaut Aramco nearly doubled its quarterly profit, raking in a staggering $48B.
The global energy divide is deepening… The US and its G7 allies want to keep oil prices low for consumers (and to punish Putin). But Saudi Arabia, Russia, and their 21 OPEC+ allies want to keep prices high (and profits gushing) — and they control most oil exports. To secure their energy independence, Western countries are getting creative: Europe’s reopening closed nuclear facilities and the US is tapping its strategic reserves (short term) and investing more in renewables (long term).