Oil prices dipped early on Wednesday after the White House called on the OPEC+ group to increase oil production more than they had planned in order to tame rising gasoline prices that could derail the global economic recovery.
OPEC and its Russia-led allies had already agreed to ease their collective cuts by 400,000 barrels per day (bpd) every month beginning this month as demand is picking up after last year’s lockdowns.
Following the public pressure from the United States on OPEC+ to raise oil supply, oil prices slumped early on Wednesday before the weekly EIA inventory report. WTI Crude had plunged by 1.83% at $67.06 as of 8:40 a.m. EDT, and Brent Crude was down below $70 a barrel again, dropping 1.93% at $69.40.
Apparently, the White House thinks OPEC+ is not doing enough to ensure more supply, especially considering the recent oil price rally that raised gasoline prices.
“We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices,” U.S. National Security Advisor Jake Sullivan said on Wednesday in a statement obtained by CNBC.
“Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery,” Sullivan added, in what was one of the first direct calls from the Biden Administration on the OPEC+ alliance. Related: Iran Nuclear Deal Talks Stalled Following Oil Tanker Attack
“Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery,” the statement further reads, as per Reuters.
Former President Donald Trump frequently used Twitter to call on OPEC to either raise or reduce production, depending on how tight, or not, the oil market was.
U.S. gasoline prices are high, even after the recent concerns about resurging COVID dragged down international crude oil prices, with WTI Crude now below $70 a barrel.
On August 9, the national average was $3.19 a gallon. That is the most expensive gas price average of the year and $1.02 more than a year ago, a nickel more than a month ago, and two cents more than a week ago, AAA said earlier this week.
“The variation in prices is partly attributed to the U.S. seeing an increase in demand and decrease in stocks,” AAA noted.
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By Tsvetana Paraskova for Oilprice.com
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OPEC+ therefore assesses conditions in the market regularly on daily to ensure that they don’t tip the market to deficit or glut. It is neither OPEC+'s job nor its intention to ensure that US gasoline prices don’t go high. Therefore, calls by the United States on OPEC+ to boost production will have no impact on its production policies.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London