The “power struggle” between leading cartel member Saudi Arabia and the United Arab Emirates over production levels could push gas prices to “$3.50 or $4 a gallon,” PRICE Futures Group senior analyst Phil Flynn told FOX Business Neil Cavuto on “Cavuto: Coast to Coast.”
“If we don’t get the production from OPEC, it could mean the [oil] prices are going to go sharply higher,” Flynn warned.
In fact, gas prices in Los Angeles are already “just a penny away” from notching the highest level in nine years, which would be approximately $4.33 per gallon, GasBuddy Head of Petroleum Analysis Patrick de Hann tweeted Tuesday.
The prices are heavily dependent upon if Saudi Arabia and UAE can reach an agreement — although it is unclear when talks will resume if at all.
On Sunday, the UAE pushed back against the OPEC Plus group, which includes non-OPEC producers like Russia. The UAE said it supported a proposed gradual increase in production favored by Saudi Arabia, the group’s largest producer, and by non-member Russia. But the UAE said it also wanted an increase in its own permitted level of production.
With no new date set for resuming talks, oil markets are left in a state of at least temporary uncertainty about future supply, as demand for fuel continues to recover from the worst of the coronavirus pandemic.
The infighting, however, can also have the opposite effect on gas prices, according to Flynn.
“It can go the other way, where the OPEC Plus cartel blows up and they get into a production war and try to flood the market with oil and bring prices back down,” Flynn said.
As economies began rebounding from the coronavirus pandemic and vaccine distribution picked up steam, the OPEC Plus group increased oil production so that daily cuts averaged around 6 million barrels per day.
Currently, the OPEC Plus alliance is producing some 37 million barrels per day compared to around 43 million barrels per day in April of last year, at the start of the pandemic.
OPEC Plus has been meeting monthly to decide on adding more production. Yet two days of talks last week did not produce an agreement. Talks were scheduled to resume Monday, but hours later came an announcement that the session had been called off.
The Associated Press contributed to this report.