The rift between the Sauda-backed Organization of the Petroleum-Exporting Countries (OPEC+) and a number of Western nations has deepened. This following the former’s recent announcement that it was set to make its most significant supply cut in two years, slashing its total output by around two million barrels a day.
It is a development that is expected to put even greater strain on the world’s substantially decreased oil supply as winter approaches. It also comes at a rather inopportune time, as the European Union has again imposed embargoes against Russian oil in light of its continued occupation of Ukraine.
The supply cut is expected to increase petroleum spot prices, especially for oil produced in the Middle East. This poses a serious issue in Asia, a region that primarily depends on Middle Eastern oil for power generation.
The subsequent soaring of prices is expected to add to the economic burden already faced by two-thirds of Asian nations in light of the rising cost of living. Likewise, European nations are set to burn more oil instead of Russian gas to stay warm this winter at the expense of their carbon-neutrality goals.
South Korea, in particular, expressed worries that decreased production would jack prices back to the highs seen in the second quarter of this year. The resurgent prices are expected to affect production costs in the manufacturing sector, the country’s primary source of income, this season.
Likewise, the United States reacted sharply to the news, with President Joe Biden going so far as to call OPEC+’s decision a shortsighted move. Nevertheless, the US government is keeping an eye on the situation to gauge the need to release more of its own oil stock to stem increasing fuel prices.
Given how EU sanctions against Russian oil and petroleum products are set for implementation in December 2022 and February 2023, financial analysts have raised their forecasts for the price of oil in the coming months.
Also, emerging markets for oil importation, like Sri Lanka, are feeling the crunch. This prompted Sri Lankan President Ranil Wickremesinghe to remark that countries like his need to pay even higher prices while richer countries build up their stockpiles for the season.
Wickremesinghe added, however, that even the wealthiest nations need to face up to the looming specter of even higher inflation rates come next year.