Chill! It's only half a billion barrels!!!

Projected Oil Deficit Next Quarter Signals Higher Gas Prices

I had first heard about this a week ago through an article at KingWorldNews that briefly mentioned OPEC is cutting back on production. This site has some great interviews and commentaries from some very well known people in the business and always seem to be ahead by a few days to a few weeks before mainstream begins to pick up on these important developments. The story is picking up steam

Bloomberg has an article out this morning. So does Yahoo Finance. So does Zero Hedge. So does the Financial Post. In fact, Reuters reported back on June 28 that an OPEC forecast suggested a 2 million barrel oil deficit in August. This means we're already well into the oil deficit since it started several months ago. The CBC in Canada reported in April that oil prices jumped 8% after OPEC had announced a surprise 1 million barrel per day cut. That was 5 months ago!

Saudi Arabia announced last month that the the deficit would increase from 2 to 3 million barrels per day in the final quarter of the year. First, they cut by a million in April, then cut another million for the summer and now, they're cutting by another million barrels per day. Obviously, this is a maneuver to force oil and gas prices upward.

As a result, November oil futures have hit a new high for the year and you know what that means. It means higher prices at the pumps as we head into the Fall and Winter. I wonder how central banks will deal with this as it's sure to ramp up inflation all at a time when they've increased interest rates in the last year and a half, to 21 year highs in order to tamp down inflation. At the least, it could send us into recession, if we're not in recession already.

Doing the calculations here, I figured that between April to September, we'll have already seen an estimated 203 million barrels cut from production, ending September 30th. Calculating the 3 million barrel per day deficit for the coming final quarter of the year, we get a 276 million barrel deficit. Add it all up and we can see that OPEC will have cut oil production by an estimated 479 million barrels this year. That's pretty darn close to half a billion barrels! They're not messing around.

So then, if you're wondering why gasoline prices have remained elevated while the U.S. dollar has remained relatively strong, now you know why. This has all been 100% orchestrated by OPEC. They're producing far less and making more profits as a result. It's a great business strategy for them but for us, it's a different story. As prices for just about everything remains elevated and as oil continues to rise as I expect it will, it will drive prices for everything else we buy even higher.

If inflation keeps rising, does that spell higher interest rates as well? I'm afraid so. Those central bankers are determined to bring inflation down to their imaginary 2% line. Just a week ago, the Bank of Canada announced a pause on rate increases and decided to hold at 5% but also said they'd increase rates if they see fit. While Canada's dollar is a 'petrodollar' just like the American dollar and will likely strengthen as oil prices go higher, this will only benefit the UberWealthy. The rest of us will see higher oil prices and most likely, increased interest rates as well.

The Zero Hedge article notes that if realized, this will be the biggest oil deficit since 2007. It's not a question of 'IF' anymore. OPEC is going for it. Back then, OPEC drove oil prices to $145 per barrel and we all know what followed, the Great Financial Crisis. The ramifications are deadly serious as it seems we are about to see a repeat of 2008/2009.

History doesn't repeat but it often rhymes and all of this sure looks familiar so get ready for higher gas prices this Fall. Remember the old adage, 'The cure for high prices is high prices'. It's going to get bumpy for a while but eventually when things top out, prices should start to come back down again.

Below, you'll see a link to a previous article titled, 'Oil prices in gold remarkably stable over last 70 years'. The same can't be said for our ever depreciating currencies as they lose their purchasing power. Should we be paying for oil deliveries with gold in the near future? If gold continues to rise as it has been these last few years, it may be the better choice and we might even get more oil out of the deal. Time will tell.

Peace and love to everyone!


I'm now also on Substack with new podcasts. 

Previous Posts:

Loose lips sink ships. Your co-workers are not your friends.

Central bank gold buying spree not slowing down.

Canada holds rates steady at 5%.

Why can't we all just get along?

Oil prices in gold remarkably stable for last 70+ years.

Spent money is not saved money.

USA DEBT: $32 Trillion and counting...

San Francisco - Echoes of old Detroit

M2 money contraction + rate hike double lag effect

Silver's massive 237 million ounce deficit


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Name's Joe and I live in Ontario, Canada. I like writing on a wide variety of topics. I enjoy keeping track of markets, investing and commodities and the crypto sector. Also do some coding for web browsers.

The Brave New World
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