Gasoline prices are going up as companies slash production

Gasoline prices are rising, and no, President Joe Biden is not responsible; oil companies are driving up prices to increase profits.

The Organization of the Petroleum Exporting Countries and major corporations are holding back production, and no government official can stop them. The more interesting question is how long it lasts, and who will benefit?

Gasoline prices are primarily derived from international oil markets. The Brent benchmark dropped to $32 a barrel during the COVID-19 pandemic in May 2020 and has seesawed since August 2020 between $64 and $112. This week, Brent fetches about $92 a barrel.

OPEC and Russia, steered by Saudi Crown Prince Mohammed bin Salman, have worked hard to keep prices above $85 a barrel. Saudi Arabia alone has cut production to 9 million barrels a day, withholding 3 million barrels from a roughly 100 million barrel-a-day market.

OPEC is producing at the lowest levels in two years, leaving other nations, including Iran and Venezuela, to add production. Lower-than-expected demand from China has also deflated prices. Frustrated OPEC members will likely maintain the current cuts when they meet on Oct. 4.

U.S. and international oil companies, meanwhile, appear happy to go along with the ride. Anxious to regain investor trust, oil executives have promised to practice “fiscal discipline” and generate profits for shareholders.

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