In news that could bring cheap gas prices for American households, OPEC+ has once again thrown a wrench into the U.S. oil market, flooding it with supply, causing crude oil to hit its lowest price since 2021.
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This strategic decision has many Americans questioning the potential economic impact, particularly as inflation continues to squeeze pocketbooks.
On May 5, 2025, U.S. crude oil futures dropped nearly 2%, settling at $57.10 a barrel, a level unseen since February 2021.
OPEC+, the consortium of oil-rich nations, decided to increase production for the second month in a row, this time by 411,000 barrels per day.
This move, aimed at achieving market balance, backfired by contributing to an oversupply scenario.
This is a development that resonates with concerns of economic ramifications.
While increased oil production is driving prices down, industry experts, including those from Goldman Sachs, now anticipate U.S. crude prices could dip further to the low $50s before stabilizing between $60 and $80.
Gas prices, typically impacted by oil prices, are projected to benefit consumers this summer.
The national average gas price stands at $3.12, but forecasts suggest prices could drop below $3 per gallon.
However, falling oil prices usually lead to cheaper gas, but that often comes with a lag.
Current refinery maintenance has capped the extent of price drops, but a rise in output is expected soon.
“While gasoline inventories have been tightening due to ongoing refinery maintenance — which has limited how much gas prices have fallen in response to lower oil — refinery output is expected to rise soon,” said gas price expert Patrick De Haan.
Prolonged low prices can stimulate market corrections. As analyst Rob Thummel puts it, “The solution to low prices is low prices.”
If prices remain unprofitable, supply may dwindle, leading to potential surges down the line.
This delicate dance of supply and demand has broader implications, with many OPEC countries needing oil prices above $80 per barrel to maintain budgets.
Notably, the UAE remains an exception, The Business Insider reports.
As global markets adapt, the United States finds itself at a crossroads with potential mixed impacts, from lower consumer costs to possible economic instability for oil-producing states.
Oil price keeps dropping. OPEC+ to accelerate oil output, which may lower the price even further. -Reuters
This is good news for Ukraine, for Russia will have less money to finance the war with Ukraine. pic.twitter.com/zn21jlCsSL
— Cat Dylan (@CatDylanNews) May 5, 2025
