OPEC confirms production cuts, but spiking fuel prices aren’t expected

VIENNA (March 23) — OPEC members will cut crude oil production by 2.1 million barrels a day and maintain lower levels of output for a full year starting April 1, according to an Associated Press report.

The group of 11 oil producing nations approved the cuts in an effort to strengthen prices by ending a global oil glut. Already, the decision is being reflected in higher fuel prices: crude jumped almost $3 US a barrel two weeks ago after oil ministers reached an agreement in principle to curtail production, and fuel companies followed suit with higher prices at the pump.

While truck operators may have already seen the lowest retail prices for the year, severe price spikes are not expected.

“We are not going to return to prices as high as what we saw around spring last year or in 1997,” said Tom Closa, publisher of the Oil Price Information Service, in an interview with Newport’s RoadStar Radio News. The only exception to this forecast should be the West Coast, where there has been a confluence of refinery problems.

As for the long-term outlook, prices should remain steady, thanks mainly to an oversupply of crude oil in world markets.

“If OPEC and non-OPEC countries actually follow through and cut production by 2 million barrels a day, maybe we’ll set up for a situation where we have a cold winter next year and the excess oil supply will disappear,” Closa said. “It took three years to build up this excess, and it’s not going to disappear in just a few weeks.”