OPEC, Russia Align on Oil Production Cut

Tim Healey
by Tim Healey
opec russia align on oil production cut

Saudi Arabia and Russia have agreed to cut oil production in a bid to drive prices higher.

The two countries are the leaders of the OPEC Plus consortium, and the planned cuts are the biggest in over two years.

It's a counter-offensive to the American and European bids to generate lower gas prices at the pump and stop Russia from profiting from crude oil in the wake of its invasion of Ukraine.

U.S. President Joe Biden and European leaders have pushed for more oil production in order to achieve both goals.

The planned production cut of about two million barrels of crude oil per day comes out to about 2 percent of global oil production.

The White House has responded by accusing OPEC Plus of "aligning" with Russia. Saudi Arabia's decision will also put it at odds with the U.S., diplomatically speaking.

For its part, Saudi Arabia claims its acting ahead of an anticipated downward slide in the global economy that could lead to weakened demand for oil, and thus, lower prices.

As a result of the cut, the price of Brent crude -- the international standard -- rose by 1.5 percent.

The Biden administration is responding by ordering the release of 10 million barrels from the Strategic Petroleum Reserve. That follows earlier statements from the administration that it would not extend a six-month run of releasing one million extra barrels per day. That run was set to finish at the end of this month.

This all follows the announcement of a proposed plan championed by Biden and the European Union to cap the price of Russian oil.

Experts say that OPEC Plus countries often fall short of production quotas, so the actual cut may be more like one million barrels per day. They also point out that a slowing economy could still weaken demand so much that the cut doesn't matter -- prices could still come down.

We shall see what happens.

[Image: Shutterstock.com/Golden Dayz]

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  • Mike Mike on Oct 11, 2022

    Yes, I did get it wrong. Replace "espionage" with "sabotage".

  • Mike Mike on Oct 13, 2022


    Thank you. I meant to say "sabotage". I was drinking at the time. I have no regrets.


    • Jeff S Jeff S on Oct 13, 2022

      So many comments one cannot blame you for having a drink or two. One way or another things will work out especially when the price of crude goes to over $100 a barrel companies will do more fracking and increase production of existing wells and if the price of oil stays up long enough there will be more drilling which will cause demand for the Saudi oil to come down and then the Saudi's will be forced to increase production to get more revenue and to put the smaller producers out of business. This happens over and over and this was before Biden entered office. The Saudi's before this announcement were not meeting their quotas by over a million barrels a day. I think in the long run we need to reduce our demand for oil which will eventually stabilize our economy. The Saudis don't have anything else to sell and prop up their economy but their oil so if we and most of the other countries reduce our demand for their oil they will be hurt more than we they don't have a diversified economy. The Saudi princes will not be able to continue their lavish lifestyles and their own people will start rebelling and possibly overthrow them. We have not really learned from the 1973 Arab Oil Embargo (OPEC) and the 1979 Iranian Hostage Crisis we seem to be repeating and repeating the same mistakes over kind of like Ground Hog Day and the definition of insanity. In the long term we need to be planning for using more and diverse types of energy and becoming more energy independent . Coal and natural gas should be used until we can develop and expand newer cleaner energy and expanding nuclear energy should be part of this equation and not just solar and wind which do not work everywhere.

  • Jwee More range and faster charging cannot be good news for the heavily indebted and distracted Musk.Tesla China is discounting their cars. Apart from the Model 3, no one is much buying Tesla's here in Europe. Other groups have already passed Tesla in Europe, where it was once dominant.Among manufacturers, 2021 EV sales:VW Group 25%, Stellantis at 14.5%,Tesla at 13.9%Hyundai-Kia at 11.2% Renault Group at 10.3%. Just 2 years ago, Tesla had a commanding 31.1% share of the European EV marketOuch. https://carsalesbase.com/european-sales-2021-ev/@lou_BC, carsalebase.com changed their data, so this is slightly different than last time I posted this, but same idea.
  • Varezhka Given how long the Mitsubishi USA has been in red, that's a hard one. I mean, this company has been losing money in all regions *except* SE Asia and Oceania ever since they lost the commercial division to Daimler.I think the only reason we still have the brand is A) Mitsubishi conglomerate's pride won't allow it B) US still a source of large volume for the company, even if they lose money on each one and C) it cost too much money to pull out and no one wants to take responsibility. If I was the head of Mitsubishi's North American operation and retreat was not an option, I think my best bet would be to reduce overhead by replacing all the cars with rebadged Nissans built in Tennessee and Mexico.As much as I'd like to see the return of Triton, Pajero Sport (Montero Sport to you and me), and Delica I'm sure that's more nostalgia and grass is greener thing than anything else.
  • Varezhka If there's one (small) downside to the dealer not being allowed to sell above MSRP, it's that now we get a lot of people signing up for the car with zero intention of keeping the car they bought. We end up with a lot of "lightly used" examples on sale for a huge mark-up, including those self-purchased by the dealerships themselves. I'm sure this is what we'll end up seeing with GR Corolla in Japan as well.This is also why the Land Cruiser has a 4 year waitlist in Japan (36K USD starting MSRP -> buy and immediately flip for 10, 20K more -> profit) I'm not sure if there's a good solution for this apart from setting the MSRP higher to match what the market allows, though this lottery system is probably as close as we can get.
  • Jeff S @Lou_BC--Unrelated to this article but of interest I found this on You Tube which explains why certain vehicles are not available in the US because of how the CAFE measures fuel standards. I remember you commenting on this a few years ago on another article on TTAC. The 2023 Chevrolet Montana is an adorable small truck that's never coming to the USA. It's not because of the 1.2L engine, or that Americans aren't interested in small trucks, it's that fuel economy legislation effectively prevents small trucks from happening. What about the Maverick? It's not as small as you think. CAFE, or Corporate Average Fuel Economy is the real reason trucks in America are all at least a specific dimension. Here's how it works and why it means no tiny trucks for us. https://www.youtube.com/watch?v=-eoMrwrGA8A&ab_channel=AlexonAutos
  • Gabe A new retro-styled Montero as their halo vehicle to compete against the Bronco, Wrangler and 4Runner. Boxy, round headlights like the 1st generation, two door and four door models, body on frame.A compact, urban truck, Mighty Max, to compete against the Maverick. Retro-styled like the early 90s Mighty Max.A new Outlander Sport as more of a wagon/crossover to compete against the Crosstrek and Kona. Needs to have more power (190+ HP) and a legit transmission, no CVT.A new Eclipse hybrid to compete against the upcoming redesigned Prius. Just match the Prius's specs and make it look great.Drop the Eclipse Cross, I am not sure why they wanted to resurrect the Pontiac Aztec. Keep the Mirage and keep it cheap, make the styling better and up the wheel size. The Outlander seems fine.I like the idea of some sort of commercial vehicle, something similar in size to the Promaster City but with AWD.