Gasoline futures tick higher on OPEC+ production cut
Gasoline futures prices have started to rise again, after the global oil cartel led by Russia and Saudi Arabia vowed to cut production.
Why it matters: If sustained, wholesale gas prices could lead to an uptick in consumer prices, reinvigorating inflation as a political issue.
Driving the news: A key U.S. wholesale futures price for a fuel known as RBOB — a kind of unfinished gas that's blended with ethanol before being sold to consumers — is up more than 13% this week, to roughly $2.70 a gallon.
- The trajectory implies consumer prices will increase in the weeks to come. The national average is just shy of $3.90 according to AAA.
Yes, but: That's still much lower than the record-high prices of more than $5 a gallon we saw over the summer.
- Still, it's unhelpful to the White House, which has pointed to the decline in consumer gasoline prices as a modest victory in recent months — and to the Federal Reserve, which continues to fight overall inflation with interest rate hikes.
The bottom line: The market reaction to the production cut news has been somewhat muted, amid growing concerns that the global engine of economic growth and oil consumption — China — is struggling mightily, weighing on demand.
- The White House's willingness to tap the Strategic Petroleum Reserve to counter price spikes also appears to have insulated the market.