Russia Cuts its Oil Production; Drivers May Not Notice

Oil supplies play just one part in the world's complex retail gasoline markets

Woman with hat and glasses fills car with gas at the station

Extremee-Photographer / Getty Images

Key Takeaways

  • Russia said it will trim its daily oil output by 5%—about 500,000 barrels a day—in March.
  • The production cut amounts to just one of every 200 barrels consumed every day worldwide.
  • Retail gasoline prices reflect an array of other factors such as geography and local regulations.

Global crude oil prices rose Friday after Russia said it will cut its monthly oil production by 5% beginning in March. Yet drivers might not see a difference at the gas pump anytime soon, if at all.

Russia said it would reduce its oil output by 500,000 barrels a day in response to sanctions from the European Union and Group of Seven. The price of Brent crude, the global benchmark, increased as much as 2.7% to $86.78 per barrel, extending a week-long rebound after declining 7% in the first five weeks of the year.

Drivers, however, are unlikely to see a repeat of last year's surge in gasoline costs, mostly because of the complex nature of the global fuel market.

Here are a few reasons why Russia's announcement may not impact gasoline prices much, particularly in the U.S. and Europe.

Sanctions on Russian Oil

By and large, Russian oil already has stopped flowing West because of price caps established by the U.S. and E.U. In addition, the E.U. banned seaborne imports of Russian crude in December and this week did the same for Russian fuel. The U.S. banned all Russian oil imports shortly after the country's invasion of Ukraine last year.

As a result, the price of Russian crude has dropped significantly, trading at a 30-35% discount to Brent crude.

Much of the country's crude now gets shipped to China and India, which consume about a fifth of the world's oil and related products, and Russia has said it will refuse to sell to countries adhering to sanctions or price caps.

Russia's Role in Global Production

Even as the world's third-largest largest crude oil producer, the country produces just one in every nine barrels of oil the world consumes every day, and its planned production cut equates to just one of every 200 barrels consumed daily.

Gas Prices Reflect Many Costs Aside From Oil

The retail price of gasoline comprises myriad costs—refining crude into gasoline, distributing gasoline from refineries to gas stations, marketing expenses, and taxes, among others. In the U.S., the price of crude accounts for just more than half of what consumers pay for a gallon of gas.

Location Matters

Gasoline prices reflect the proximity of retail pumps to pipelines and refineries. In the U.S., for instance, drivers usually find cheaper gas along the Gulf Coast, home to almost half the nation's petroleum refining capacity. For example, a gallon of gas currently costs $3.99 per gallon in Lake Placid, N.Y., compared with $2.94 per gallon in Houston.

So Do Regulations

Fuel-efficiency regulations increase gasoline prices in some areas. California drivers routinely pay 30-40% more than average U.S. prices, largely because of higher-octane fuel blend requirements, state taxes discouraging gasoline use, and stringent environmental regulations.

In Norway, which has strict emissions regulations, a liter of gasoline currently costs $2.18 ($8.25 per gallon), compared with $0.36 per liter ($1.36 per gallon) in Egypt, where fuel standards are lax.

Time Lag

Production changes take time to move through the global supply chain. OPEC+, led by Saudi Arabia and Russia, cut its daily production in November by 2 million barrels—four times the amount of Russia's reduction. At the time, analysts expected the move would boost U.S. gas prices by 15 to 30 cents per gallon this winter.

Graph of average price of on gallon of gas in the U.S. from November 2022 to Feb. 2023.

Instead, gas prices fell almost 19% between Nov. 1 and Christmas, to an average of $3.05 per gallon from $3.75. They since have rebounded to about $3.40 per gallon but remain considerably lower than expected.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. CNN. "Russia to cut oil output by 5% as sanctions bite"


  3. Center for Strategic and International Studies. "European Union Imposes Partial Ban on Russian Oil"

  4. "Oil Price Charts."

  5. U.S. Energy Information Administration. "What Countries Are the Top Producers and Consumers of Oil?"

  6. U.S. Energy Information Administration. "Short-Term Energy Outlook."

  7. U.S. Energy Information Administration. "Factors Affecting Gasoline Prices."

  8. U.S. Energy Information Administration. "Gulf of Mexico Fact Sheet."


  10. Institute for Energy Research. "Gasoline Prices Highest in Six Years; California's Prices Highest in the Nation"

  11. "Norway Fuel Prices, Electricity Prices."

  12. "Maximum Sulfur Limits in Gasoline, 2021."

  13. Forbes. "OPEC's Oil Production Cut Will Cause More Pain At The Pump."

  14. GasBuddy. "Fuel Price Trends."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.