The Biden administration is urging OPEC+ producers to increase oil supply to ease crude prices and blunt the domestic pressure of high gasoline costs.
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National Security Advisor Jake Sullivan said Aug. 11 in a statement that current higher gasoline prices, "if left unchecked, risk harming the ongoing global recovery." He pointed to crude oil futures being higher than pre-pandemic levels.
"While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022," Sullivan said. "At a critical moment in the global recovery, this is simply not enough."
Several OPEC+ officials, including from Saudi Arabia and the UAE, did not respond to requests for comment.
OPEC, Russia and nine other countries, in an alliance known as OPEC+, agreed in July to increase crude production by 400,000 b/d from August through the end of 2022, a volume many analysts said will be insufficient to meet seasonal summer demand.
The next OPEC+ meeting is scheduled virtually for Sept. 1.
US retail gasoline prices averaged $3.14/gal in July, the highest monthly average since October 2014, the US Energy Information Administration said Aug. 10. EIA said the prices reflect higher crude prices and rising wholesale gasoline margins, amid relatively low gasoline stocks.
Kevin Book, managing director of ClearView Energy Partners, said the White House is likely concerned about high fuel prices because of the price sensitivity of voters in moderate districts and the short window left to implement Biden's climate and energy policy agenda before attention shifts to the November 2022 midterm elections, when Democrats could lose their narrow majorities in Congress.
US oil production remains about 1.6 million b/d below the pre-pandemic level of 12.8 million b/d set in March 2020, as investors continue to demand capital discipline that prioritizes shareholder returns over production growth. EIA expects US output to rise to 11.77 million b/d in 2022.
S&P Global Platts Analytics recently dropped its estimate for 2021 global oil supply growth by 600,000 b/d to 2.5 million b/d, driven by lower OPEC+ supply. It sees oil supply growth jumping to 6.8 million b/d in 2022, with increases across the board from OPEC, Russia and the US.
OPEC+ has also come under pressure from India, a key buyer of its crudes, to make oil prices more affordable to its developing economy.
Sullivan said President Joe Biden "wants Americans to have access to affordable and reliable energy, including at the pump."
"We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices," he said. "Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery."
The Biden administration also asked the Federal Trade Commission to monitor the US gasoline market and "address any illegal conduct that might be contributing to price increases for consumers at the pump."
"While many factors can affect gas prices, the president wants to ensure that consumer are not paying more for gas because of anti-competitive or other illegal practices," National Economic Council Director Brian Deese wrote to FTC Chair Lina Khan.
US oil dependence
The White House's effort to wade into oil market dynamics was met with criticism by some, given the Biden administration's broad push to curb US dependence on fossil fuels.
Senator John Cornyn, Republican-Texas, said it wasn't "a good look" for a US president to be "begging the Saudis to increase production while the White House ties one hand behind the backs of American energy companies."
Alberta Energy Minister Sonya Savage said Biden's message to OPEC did not square with his revoking the Keystone XL pipeline permit in January or the Intergovernmental Panel on Climate Change's Aug. 9 "code red" climate report.
"On the one hand, KXL is cancelled because of the urgency of climate change," she said. "On the other hand, six months later OPEC+ is asked to increase oil production because of high gasoline prices due to oil supply concerns."
Billy Bailey, portfolio manager at Saltstone Capital, predicted OPEC+ would not rush into ramping up production, especially given pandemic risks from the delta strain of coronavirus. He said on Twitter that OPEC+ was more likely to engage in "small virtue-signaling" to allow the US government to point to a win.