Gas Price Fears Growing As OPEC Announces New Production Restrictions

OPEC+ nations announced on Wednesday that they plan to restrict oil production by two million barrels per day. The sudden restriction of global energy supply prompted immediate concerns in the U.S. that gas prices will be climbing to new heights soon.

Meanwhile, the average price for a gallon of gas hit an all-time high in Los Angeles on Wednesday, climbing to $6.50. The average for the state of California hit $6.42 per gallon, approaching the record price in the state of $6.44 reached in June.

The nationwide average for a gallon of regular-grade gas stood at $3.87 on Thursday afternoon. A month ago the average was $3.78 and one year ago it was $3.22.

The L.A. Times wrote that the surging prices in the Golden State are already beginning to be felt in other western states and into the Great Lakes region. The paper quoted GasBuddy head analyst Patrick De Haan, who said that increases in those regions are expected to continue in the coming days. He noted that the Northeast and Gulf Coast regions are still seeing lower prices, helping to keep the national average in check for the time being.

The Biden administration is responding to the news that OPEC is reducing oil supplies by indicating it will continue to draw down the nation’s Strategic Petroleum Reserve (SPR) to low levels not seen in decades. The White House is also doubling down on restricting U.S. domestic production of fossil fuels.

On Thursday morning, the legally required 90-day comment period for the Department of the Interior’s proposed new offshore oil leasing plan concluded. The department is now set to issue a decision about its new policy.

The latest Interior plan tosses aside leasing plans announced during the Trump administration. It is now possible that no federal leases will be granted for offshore production anywhere through at least 2028.

The American Petroleum Institute (API) submitted formal comments regarding the new proposal, arguing that “every previous administration, whether Republican or Democrat, has recognized the strategic advantages of U.S. offshore domestic energy and fulfilled their statutory obligation to maintain an offshore leasing program and continuously hold lease sales.”

API senior vice president of policy Frank Macchiarola said, “Announcing a program with zero new lease sales would be the exact wrong policy at the wrong time.”