OPEC plans to cut output by 10 percent in April
By James R. Healey
USA Today
OPEC, the cartel that pumps one-third of the world's oil, shocked the globe yesterday by saying production quotas would be strictly enforced immediately and production would be cut again April 1, slicing output 10 percent.
Associated Press
The United States warned that higher prices caused by tighter oil supplies could stymie a struggling recovery.
OPEC announced yesterday that it would enforce quotas immediately and trim production effective April 1.
Energy prices jumped on the news, beginning an unsteady climb to what analysts say will be record gasoline prices this summer.
"We're nowhere near the high on gasoline," says Tom Kloza, veteran oil analyst at Oil Price Information Service. "That'll come in July and August and will have more to do with our own refinery capacity than with OPEC."
Hawai'i is posting the highest state average in the country at $2.068 a gallon for unleaded regular gasoline, motorists' organization AAA reported yesterday.
The average was down from the record $2.132 a gallon set on Oct. 23.
Nationally, unleaded regular averaged $1.638 a gallon yesterday. That's less than a dime lower than the record $1.737 on Aug. 30.
If members of the Organization of Petroleum Exporting Countries keep their promise to toe the line on quotas now and cut later — by no means certain — it could curtail supplies of oil just as warm weather boosts driving and gasoline demand. It also would coincide with the U.S. shift to summer-blend gas to cut pollution. Some blends are unique and expensive, and switchovers aren't always smooth, causing local shortages that drive up gas prices.
The good news for U.S. motorists is that OPEC has a history of quietly ignoring its own quotas, keeping oil supplies plentiful and U.S. gas prices relatively low.
"I don't think (cuts) will happen because OPEC is serious about keeping (crude oil) prices from going above $35" a barrel, says A.F. Alhajji, assistant professor of business administration at Ohio Northern University who has written about OPEC and world oil politics. Foreign oil companies operating in OPEC nations aren't likely to cut output to honor OPEC quotas, he says, ensuring production beyond the quotas.
Advertiser staff contributed the information on Hawai'i in this report.
