OPEC+ and the Strategic Push for Increased Oil Production

The U.S. administration has prioritized lower oil and gas prices to benefit American consumers and businesses while exerting economic pressure on adversarial oil-dependent nations like Iran and Venezuela. However, OPEC+ has surprised markets by supporting increased oil production, despite many of its members requiring oil prices above $80 per barrel to balance their national budgets. With oil hovering around $70 per barrel in March 2025, this decision seems counterintuitive. However, deeper geopolitical, economic, and strategic motivations explain why OPEC+ is taking this calculated risk.

The Importance of Budget Balancing Prices

OPEC+ members depend heavily on oil revenues to finance government expenditures, including infrastructure projects, social welfare programs, and debt obligations. Key players such as Saudi Arabia, Iraq, and the UAE require oil prices of at least $80–$85 per barrel to avoid budget deficits. Given that current prices are lower, increasing production appears to be a self-defeating move that could intensify financial strain. However, several strategic reasons drive this decision.

Why Is OPEC+ Increasing Production?

1. Maintaining Market Share

The resurgence of U.S. shale oil production poses a significant challenge to OPEC+ dominance. By increasing supply and keeping prices low, OPEC+ aims to curb the profitability of U.S. shale producers, who typically have higher extraction costs. This strategy mirrors the 2014–2016 period when OPEC flooded the market to weaken competitors.

2. Geopolitical Considerations

Trump has persistently urged OPEC+ to raise production, aiming to lower prices for American consumers. Some OPEC+ members, particularly Saudi Arabia, may view compliance as a way to strengthen ties with the U.S., ensuring continued military cooperation and favorable trade relations. Additionally, lower oil prices weaken adversaries like Iran, aligning with U.S. strategic interests.

3. Internal OPEC+ Dynamics

There are growing pressures within OPEC+ from countries like the UAE, which have expanded production capacity and are eager to sell more oil. Raising production allows for a compromise that maintains unity within the cartel, preventing internal disputes from undermining collective decision-making.

4. Betting on Demand Recovery

OPEC+ anticipates that global oil demand will rise in the coming months as economic activity rebounds. By increasing production now, they position themselves as the primary suppliers in a recovering market, preventing competitors from filling the gap.

5. Preventing a Market Collapse

While increasing production appears to suppress prices, it is a controlled approach to avoid a more dramatic crash. A sudden oversupply or a significant drop in demand could drive oil prices down even further, as seen in 2020 when oil briefly turned negative. OPEC+ may be proactively managing market stability by adjusting output incrementally.

The Impact of Lower Oil Prices

While OPEC+ faces financial risks from lower oil prices, this decision also delivers broader economic and political benefits:

Economic Growth: Lower energy costs reduce expenses for businesses and consumers, stimulating economic activity.
Political Leverage: Affordable gasoline resonates with American voters, reinforcing Trump’s economic agenda.
Strategic Pressure: Countries like Iran and Venezuela suffer financially under low oil prices, limiting their geopolitical influence.

The Risks for OPEC+

Many OPEC+ members rely heavily on oil revenues, and prolonged low prices could force austerity measures, cuts to social spending, and potential political instability. Saudi Arabia, for example, has already implemented fiscal tightening measures in recent years. However, OPEC+ leaders seem willing to accept short-term economic pain in exchange for long-term dominance and geopolitical advantages.

OPEC+’s decision to boost production despite high budget balancing prices reflects a strategic calculation. By prioritizing market share, geopolitical positioning, and future demand growth, these oil-producing nations are making a long-term investment in their dominance. For the U.S., particularly under Trump’s leadership, this move aligns perfectly with the goal of keeping oil and gas prices low, providing economic relief at home while increasing pressure on rival nations. This development underscores the intricate balance between energy markets and global politics, where short-term sacrifices can translate into long-term gains for OPEC+ and its strategic allies.