Get ready for higher gas prices. The push to get higher production from OPEC ran into “unexpected” resistance as the oil-production cartel’s meeting turned into a bickering mess. As a result, the group will not hike oil production, and reaction to the decision by the market came swiftly:
In a decision that surprised oil markets and sent oil prices higher, OPEC officals said Wednesday the group had failed to reach consensus to boost output. …
Gulf delegates have been pushing in recent days for an increase of one million to 1.5 million barrels a day. But some other OPEC members have criticized the plan, arguing that the global oil supplies are sufficient and that today’s prices of $100-$115 a barrel are appropriate. Mr. El-Badri said there was no shortage in the market. The decision means OPEC members will keep their current output unchanged.
“The is one of the worst meetings we ever had in OPEC,” Saudi Arabian oil minister Ali Naimi told reporters after the meeting had ended. “We were not able to reach an agreement.”
The oil-producing states may wonder whether demand will keep pace. The American economy is slowing again, after two years of the most tepid kind of recovery, and a drop in demand combined with production increases could cause prices to collapse. The uncertainty in the West’s largest economy makes a wait-and-see attitude more prudent, although the inflated prices are also a boon to producers.
This decision puts even more pressure on President Obama and his administration. High gas prices have created real financial pain for the working and middle classes, which has cost him significant political support. An increase in supply would have pushed spot prices down, at least temporarily, allowing the political pressure to ease off the White House and encourage consumer demand in other industries. This decision assures that high prices will continue for the next few months, and possibly longer if OPEC still refuses to raise production at its next meeting.
Of course, this is part of the petard on which Obama has hoist himself by discouraging American energy production. The US does not necessarily need to be dependent on a collection of kleptocrats and dictators for its economic outlook. If we had the will to start producing in areas where known reserves could be exploited for decades — and explore areas that could extend that for centuries — then OPEC production levels would become less relevant within two or three years, and within a decade a distant chirp to Americans. Only our refusal to create hundreds of thousands of jobs and touch off an American economic boom by taking responsibility for finding our own energy resources keeps us from achieving that purpose.