On September 30, the 14 nations of the Organization of Petroleum Exporting Countries (OPEC) agreed to scale back the production of oil in the near future, immediately causing a rise in the price of crude oil. However, questions of the nations’ commitment to this deal have prevented steady growth and price per barrel has yet to reach $50. Some nations will have an incentive to produce over quotas, and OPEC has no enforcement ability.
Because oil and gasoline prices are closely correlated, OPEC’s decision to cut production will lead to price increases at the pump should the member nations follow the production quotas agreed upon. Consumers may see gas prices rise, although not by much, as the cuts will total less than 1 percent of total global oil production. However, this deal may show that OPEC nations are looking to exert their influence on global oil prices, which could cause large fluctuations.
The last time OPEC made a similar deal was in 2008 during the recession. Despite two years of low oil prices, OPEC has abstained from cutting oil production in that time span.
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