The oil cartel OPEC and allies are opening the oil tap further and pumping more oil from the ground than previously agreed. From August, the oil-producing countries will increase production by 400,000 barrels per day. Russia, Saudi Arabia and the United Arab Emirates, among others, have made that agreement today via a virtual meeting made.
The countries have agreed that all production that has not taken place due to corona will still be used. From May 2022 the plan is to produce an additional 1.6 million barrels of oil.
Due to the economic recovery from the corona crisis, oil prices have reached a record, which is reflected, among other things, in the gasoline prices. But increasing oil production will not immediately lead to a drop in the price at the pump, also because excise duties and the refining process affect the price.
“The oil price has already gone down, so I’m not surprised about this agreement. Petrol prices will not fall immediately, but the threat of a higher oil price will decrease,” says Lucia van Geus, energy advisor at The Hague Center for Strategic Studies.
earlier the oil-producing countries actually reduced oil production because of the falling oil price. The corona crisis in particular caused the market to collapse. Factories were shut down and there was less flying, driving and sailing. But now that the economy is slowly recovering, the demand for oil is also increasing.
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