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OPEC’s Failure to Reduce Oil Output to Keep U.S. Gas Prices Low

OPEC's failure to agree on output will keep U.S. gas prices low.

GettyImages-461830876
GettyImages-461830876

Historically low oil prices have OPEC so divided that marathon talks in Vienna that closed Friday could only produce one thing: disagreement.

Historically low oil prices have OPEC so divided that marathon talks in Vienna that closed Friday could only produce one thing: disagreement.

At the end of their meeting, member nations of the Organization of the Petroleum Exporting Countries surprisingly failed to agree on how much oil to produce. That leaves OPEC output steady at 30 million barrels a day, with actual daily production closer to 31.5 million barrels.

That means an already oversaturated oil market is going to remain that way. A cut in daily output would have eased pressure on oil prices, which are near historic lows.

“We decided to postpone this decision until the next OPEC meeting, when the picture will be more clear,” OPEC Secretary-General Abdalla Salem el-Badri of Libya told reporters, according to CNN.

This is a double-edged sword for the United States. On the one hand, it keeps gas prices low during the holidays, a time during which many travel to visit family. But it also puts increasing financial pressure on oil-producing parts of the country like Texas and North Dakota, places that are already reeling due to cheap energy.

U.S. oil production has also complicated things for OPEC. According to the U.S. Energy Information Administration, American oil producers produced an average of about 9.3 million barrels of crude oil per day in June, the latest data immediately available, adding to the global oversupply.

According to Reuters, Badri said Iran complicated efforts to come to an agreement on production. He said it is difficult to predict how much Tehran would pump as Western sanctions against its nuclear program are lifted.

For its part, Iran has repeatedly said it would add 1 million barrels of oil to the market each day when economic penalties are lifted. Right now, there are 2 million spare barrels of oil on the market every day.

Photo credit: Scott Olson/Getty Images

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