How did OPEC production cuts between 2017 and 2020 affect retail gasoline prices in the U.S.?
Executive summary
Between 2017 and early 2020 OPEC+ production coordination coincided with upward pressure on global crude prices and, through that channel, on U.S. gasoline: academic analysis finds the coalition raised crude while it operated (covering end‑2016 to early‑2020) and the EIA says crude makes up “more than 50%” of U.S. retail gasoline prices, so cuts that lift crude tend to raise pump prices [1] [2]. But rising U.S. oil output, weak demand (notably from China), and market expectations often offset or mute those effects, producing periods when U.S. retail gasoline did not rise in step with OPEC+ moves [3] [4].
1. OPEC+ supply actions translated into higher crude — a mechanism for pricier gasoline
When OPEC and its allies coordinated production targets the result was a measurable increase in crude prices during the coalition’s main run from late‑2016 through early‑2020, according to an ECB working paper that constructs counterfactuals showing prices rose while the agreement was in place [1]. That matters because crude is the dominant input into gasoline: the Energy Information Administration states crude prices make up more than 50% of U.S. retail gasoline prices, so upward moves in crude feed directly into pump costs [2].
2. But U.S. retail pumps did not always mirror OPEC+ moves — domestic supply dampened the pass‑through
U.S. oil production growth has repeatedly blunted OPEC+’s influence on domestic pump prices. Reuters reports that persistent U.S. output growth kept gasoline prices under pressure even as OPEC+ sought to drain inventories and lift prices; rising U.S. production kept oil prices around $70–$80 despite multiple Saudi‑led cuts [3]. That dynamic means an OPEC+ cut that lifts world crude can be offset for U.S. motorists by higher domestic supply.
3. Demand and expectations matter as much as the announced cuts
Market reaction to OPEC+ decisions depends on demand prospects and trader confidence in compliance. Reuters and Bloomberg note that cuts spur price moves only when global demand is strong and cuts are seen as binding; voluntary or already‑priced‑in cuts sometimes fail to push prices higher [5] [6]. When demand softens — for example, weak China growth or faster EV uptake — OPEC+ pricing power erodes and gasoline relief can persist despite cuts [4] [7].
4. Short‑run spikes versus longer‑term averages: headlines can exaggerate the pump effect
Local reporting and some news outlets document rapid, visible jumps at stations after high‑profile OPEC+ announcements — for example, a 30‑cent one‑day jump reported regionally — but national averages often move more gradually [8] [9]. The AP and Marketplace pieces show that motorists sometimes saw lower averages (near $3/gal in late 2024) or falling monthly averages even while OPEC+ was exercising restraint, reflecting the difference between momentary spikes and broader trends [7] [4].
5. Forecasts and policy responses reflect uncertainty — and can influence prices themselves
The EIA changed its gasoline forecast upward after OPEC+ extended cuts, explicitly linking OPEC+ action to higher retail price forecasts (EIA raised summer gasoline price forecasts by about $0.20/gal in one update) because lower world production reduces global stocks under certain demand scenarios [2]. Political and policy reactions — calls for SPR releases or export limits — surface when cuts are large and prices rise, which can themselves alter market expectations [10] [11].
6. What the evidence does not settle: magnitude and timing of pass‑through to U.S. retail gasoline
Academic work and news reporting establish the causal channel — OPEC+ cuts raise crude, crude is the main component of gasoline, and therefore cuts can raise pump prices [1] [2] [5]. But available sources do not provide a single, agreed numeric estimate of how many cents per gallon U.S. retail gasoline rose specifically from OPEC+ cuts between 2017 and 2020; the ECB paper shows the coalition raised crude but does not translate that into a single nationwide retail‑gasoline cents‑per‑gallon figure for that period [1]. Reuters and the EIA emphasize offsetting forces (U.S. supply, demand weakness) that made the pass‑through uneven [3] [2].
Bottom line: coordinated OPEC+ production cuts during the 2017–early‑2020 window were effective at raising crude oil prices and therefore had the potential to raise U.S. retail gasoline because crude is the largest cost component [1] [2]. Real‑world outcomes at the pump, however, depended on U.S. production growth, global demand trends, market expectations and compliance — factors the reporting shows often reduced or delayed the cutter’s intended effect on U.S. retail gasoline [3] [5] [4].