Motorists face more misery at the pumps after oil producers agree to cut production.

Opec+ – a group that includes Saudi Arabia and Russia – announced a cut in oil production of two million barrels per day.

While the group said it wanted to stabilise prices, it is likely to put upward pressure on pump prices. In recent months prices have begun to drop as the world economy slows. However, the discrepancy between petrol and diesel prices has increased to its widest level on record. Russia is the biggest supplier of diesel to Europe, and its invasion of Ukraine saw western sanctions placed on supplies.

Pumped up

It is expected that pump price will rise after the price of a barrel of Brent crude jumped almost 2% to more than $93 (£82) a barrel following the announcement.

“Such a deep oil production cut will inevitably see oil prices rise, forcing up the wholesale cost of fuel,” said RAC fuel spokesman Simon Williams said. “The question is when, and to what extent, retailers choose to pass these increased costs on at their forecourts.

“Despite three straight months of pump prices coming down, we believe that in many cases drivers are being charged more to fill up today than they should be based on average wholesale prices over the last few weeks.

“If we see pump prices go up within the next fortnight, we’ll know that retailers are sticking to their strategy of taking far more margin on every litre they sell than they have historically – much to the dismay of drivers up and down the country.

“We’ll be watching what retailers do when it comes to pump prices closely in the next few weeks.”

Supply and demand

The cut announced by the Organisation of the Petroleum Exporting Countries (Opec) and allies marks the biggest reduction by the group since the height of the pandemic in 2020. It comes on top of general energy supply issues in all markets after the Russian invasion. There is also economic turmoil across the globe as it recovers from Covid.

Pleas from the US and others to pump more appear to have been ignored, after oil prices spiked this spring when the war in Ukraine disrupted supplies. Global inflation and productivity falls across industry are concerning many regions. The UK is in a particularly difficult position with a ‘cost of living crisis’. Added woes in the UK come from Brexit disruption to workforce supplies and trade logistics.

Uncertain view ahead

Opec members defended their decision. They describe it as a response to significant “uncertainty” about future demand for oil, amid fears that the global economy is heading towards a recession.

Higher oil prices were a major driver of the increase in consumer prices that hit countries around the world earlier this year, pushing inflation rates to levels not seen in decades and raising political tensions.