A major oil cartel has announced the biggest cut in production in years which could push up fuel prices around the world while bolstering Russia’s war in Ukraine.
Members of OPEC+ have agreed to slash oil production by 2 million barrels per day, the largest reduction since the start of the pandemic.
The move is likely to push up the price of oil and would provide a welcome income boost to Russia which is struggling under the financial burden of its faltering war in Ukraine.
The decision sparked immediate rebuke from US President Joe Biden’s administration which has blasted OPEC+ for effectively siding with Russia.
Biden political advisor Karine Jean-Pierre said it was “short-sighted” and a “mistake” and showed that the trading bloc was backing Russia against the US and the west.
“It’s clear that OPEC+ is aligning with Russia with today’s announcement,” she told reporters aboard Air Force One.
The Biden administration warned the decision would hurt low and middle-income countries that are struggling the most with high energy prices.
OPEC+ agreed to the cut during its first meeting in person since March 2020.
The drop in output is the equivalent to about 2 per cent of global oil demand and will start in November. The group will meet again in December.
In a statement released Thursday morning (Australian time), OPEC+ said the decision was made “in light of the uncertainty that surrounds the global economic and oil market outlooks” and the need to “enhance the long-term guidance for the oil market”.
The market reacted with energy rising 0.3 per cent.
In Australia, fuel prices were already expected to rise after the Federal Government’s six-month reduction in the fuel excise came to an end on September 29.
Following the excise reintroduction, wholesale (terminal gate) prices increased by around 25 cents per litre.
The ACCC has said it is closely monitoring price movements for any uncharacteristic or abnormal retail price increases.
ULP 91 fuel prices on Thursday morning according to the FuelPrice Australia website:
- NSW $1.81
- Victoria $1.74
- Queensland $1.80
- Western Australia $1.78
- South Australia $1.83
- Tasmania $1.84
- Australian Capital Territory $1.81
- Northern Territory $2.04
