INDIANAPOLIS — OPEC is cutting oil production significantly, which is assuredly going to raise the price of gas in Indiana and the rest of the U.S.
Dr. Matt Will, an economist at the University of Indianapolis, believes there are many things that the White House can do to alleviate the burden on you at the pump. However, he doesn’t believe anything impactful will be done.
“Demand is projected to go up by two million barrels a day,” Will said on Tony Katz and The Morning News on 93 WIBC. “OPEC is going to cut production by two million barrels a day. That’s a four million barrel a day gap.”
Will said this is why prices will continue to go up.
He also theorizes that there are geopolitical motivations behind the OPEC decision to cut oil production. Will believes both Russia and OPEC want the price of oil to increase. In the coming months, he expects OPEC to follow through on cutting production while Russia will increase its production.
This, in turn, will result in more oil money ending up with Russian oil companies, he says.
Some are calling for the US to increase oil production in response. The problem, according to Will, is that the infrastructure to do that is not there.
“We don’t have it,” Will said. “The last, what we call, major downstream refinery was built in Garyville, Louisiana in 1977. We’ve had some smaller refineries do some niche things, but we haven’t built a major refinery since 1977.”
Will said the Biden Administration needs to approve licenses for more refineries to be built. Only then, he says, could the U.S. have enough capacity to have meaningful impact on the price of gas.
An initial response from President Biden on Wednesday was to release another 10-million barrels of oil from the National Strategic Reserve. As of Thursday, Gas Buddy says the average price for gas in Indiana is $4.20 a gallon.