Biden Calls on OPEC to Increase Production

August 12, 2021

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(Washington Post) President Biden on Aug. 11 outlined steps that his administration is taking to combat rising gas prices in the United States. WATCH VIDEO

Biden’s OPEC Plea Is Really Directed at Anxious Drivers (Washington Post/Bloomberg)

Why the OPEC+ Crisis Has Sparked an Oil Price Frenzy (Washington Post)

White House calls for probe of 'divergences' between oil price and gasoline costs (The Hill)

Biden team is seeking ways to address rising energy prices (Associated Press)

IEA Cuts Oil Demand Outlook on Virus, Sees Surplus in 2022 (Bloomberg/Yahoo!)

Biden asks OPEC what?... THE OPEC OPTICS: (Politico's Morning Energy)

Excerpt from Washington Post/Bloomberg: Gasoline prices have averaged more than $3 a gallon since early May. They are now back to where they were in late 2014, just as oil was beginning to crash that year. Yet as a share of expenditures, energy costs — of which road fuel is the biggest and most volatile element — remain close to their lowest in six decades of monthly data. Moreover, with summer winding down and Covid winding up, plus OPEC+ due to raise production anyway, there’s a good chance prices will ease soon, regardless.

But that ignores the fact that “3” is the decidedly unmagic number when it comes to U.S. drivers. Even if gains in fuel efficiency and incomes since the 1970s have changed the economic math for the average American, such calculations don’t quite ease the emotional pain. That is especially so in the middle of a continuing inflation scare. Trying to channel that angst away from Washington and toward Russia and some Arab monarchies is Politics 101 — as Biden’s predecessor could tell you.

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For environmentalists, the notion that Biden should stand pat and let rising pump prices spur everyone into an electric vehicle ignores the reality that the transition rests to an enormous degree on political support, part of which is subsidies to kick-start such markets. The only thing sustained high gasoline prices are likely to achieve in short order is a Republican sweep in next year’s midterm elections, thereby curtailing that support. As Kevin Book of ClearView Energy Partners puts it:

In my experience, high prices tend to usher out incumbent politicians faster than they usher in new technologies. READ MORE

Excerpt from Bloomberg/Yahoo!: The International Energy Agency cut forecasts for global oil demand “sharply” for the rest of this year as the resurgent pandemic hits major consumers, and predicted a new surplus in 2022.

It’s a marked reversal for the Paris-based agency, which just a month ago was urging the OPEC+ alliance to open the taps or risk a damaging spike in prices. The oil cartel heeded calls to hike supply, which is now arriving just as consumption slackens.

The analysis also jars with Wednesday’s call from the U.S. -- the IEA’s most influential member -- for the Organization of Petroleum Exporting Countries and its allies to ramp production up faster.

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Oil prices have retreated 6% this month as the contagious delta variant triggers renewed lockdowns in China and other key Asian consumers where vaccination rates are lagging. Brent futures are trading near $71 a barrel, having hit a two-year high near $78 in early July.

The “recent rally has lost steam on concerns that a surge in Covid-19 cases from the Delta variant could derail the recovery just as more barrels hit the market,” the IEA said.

The 23-nation OPEC+ coalition led by Saudi Arabia and Russia agreed last month on a roadmap for restoring the rest of the oil supplies it shuttered when the pandemic emerged. The additional barrels are, however, starting to flow at an inauspicious moment.

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As U.S. motorists grapple with $3-a-gallon gasoline and fears over inflation, the Biden administration is insisting that OPEC+ accelerate its supply increases. “At a critical moment in the global recovery,” OPEC’s plans are “simply not enough,” National Security Advisor Jake Sullivan said in a statement on Wednesday.

The Organization of Petroleum Exporting Countries appeared to push back a little against the U.S. request in its own monthly report, also published on Thursday, which said that the “precarious outlook” still requires “determined efforts” from its members and allied producers. READ MORE

Excerpt from Politico's Morning Energy: THE OPEC OPTICS: The Biden administration surprised the oil market with an early morning statement from National Security Adviser Jake Sullivan calling on OPEC+, which includes the cartel as well as Russia, to raise output to take some of the heat off the market. That’s an unusual call, not only because those countries are competitors of the U.S. in the global crude trade, but, as both Republicans and environmentalists noted, Biden has cast himself as a climate warrior who wants to move the U.S. to clean energy.

The early statement on OPEC was accompanied by a letter from National Economic Council Director Brian Deese calling for the Federal Trade Commission to take a close look at the gasoline market for any sign of illegal conduct, a move driven by the fact that retail gasoline prices are $3.185 a gallon, up about a nickel from a month ago and the highest level since 2014, according to AAA, despite a pullback in benchmark crude prices.

“That’s not what you’d expect in a competitive market,” Biden said in a speech Wednesday afternoon. “I want to make sure that nothing stands in the way of oil price declines leading to lower prices for consumers.”

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Conservatives also blamed Biden for erecting other roadblocks to fossil fuels at home through the Interior Department’s pause on new federal oil and gas lease sales (even though permit approvals and output on federal land haven’t suffered).

“Calling for increased OPEC+ oil production demonstrates the fallacy of the White House Federal lands energy ban,” said the U.S. Chamber of Commerce’s Christopher Guith in a statement. “We need to let the US produce oil under the world’s strictest environmental standards and boost our economy instead of Russia’s and the Middle East.”

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“Transparent oil boosterism in the week of the latest [U.N.] report shows a fundamental lack of acknowledgment about what’s driving climate disaster,” said Collin Rees, senior campaigner for Oil Change International.

What calling for OPEC action does, however, is try to signal to voters that the administration is attuned to the pocketbook issues that affect their everyday lives. With Republicans directly tying rising gas prices to Biden’s energy policies as a campaign tool, the White House needs to counter the narrative as it looks to hold onto its microscopic margins in both the House and the Senate.

“Voters can see gasoline prices a lot more easily than they can see energy transitions, and the White House has Congressional majorities to defend,” Kevin Book, managing director at ClearView Energy, told Pro's Ben Lefebvre. “Biden’s green future depends on keeping blue seats blue.” Read more from Ben here. READ MORE