The United States is considering “response options” in its relations with OPEC+ members and its de facto leader Saudi Arabia after the group announced a large 2 million bpd nominal cut in its collective oil production target earlier this week, U.S. Secretary of State Antony Blinken said.
“As to the relationship going forward, we’re reviewing a number of response options. We’re consulting closely with Congress,” Secretary Blinken said at a press conference in Peru late on Thursday.
“We will not do anything that would infringe on our interests – that’s first and foremost what will guide us – and we will keep all of those interests in mind and consult closely with all of the relevant stakeholders as we decide on any steps going forward,” Secretary Blinken added.
Asked to comment on the OPEC+ production cut, he said, “We see the decision as both disappointing and short-sighted, especially as we have a global economy that is dealing with the implications of recovering from COVID, as well as the aggression from Russia in Ukraine, the consequences that’s having.”
“We’ve said all along that supply needs to meet demand, and we’ve been clear about that and we’ve been working on that,” Secretary Blinken said.
Following the OPEC+ decision, U.S. National Security Advisor Jake Sullivan and National Economic Council (NEC) Director Brian Deese said in a statement, “The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.”
“In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” Sullivan and Deese added.
President Joe Biden has directed the Department of Energy to deliver another 10 million barrels from the Strategic Petroleum Reserve (SPR) to the market next month, they added.
“The President will continue to direct SPR releases as appropriate to protect American consumers and promote energy security, and he is directing the Secretary of Energy to explore any additional responsible actions to continue increasing domestic production in the immediate term.”
By Tsvetana Paraskova for Oilprice.com
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1- It can ask US shale oil producers to raise production to offset the OPEC+ cut. But this isn’t possible because shale oil is a spent force incapable of raising its production beyond an estimated 9.5-10 mbd.
2- It can withdraw more oil from the US Strategic petroleum reserve (SPR). This President Biden has already done when he directed the US Department of Energy (DoE) to release additional 10 million barrels (mb). This will hardly have any significant impact on prices or supplies. Moreover, it will raise the total of released SPR oil to 250 mb and reduce the volume of oil in the SPR to 417 mb, its lowest since 1984. Furthermore, the DoE will find it virtually impossible to replace previous SPR releases because of the tightness of the market.
3- The White House may invoke the NOPEC Bill if necessary to sue OPEC+ for so-called cartel-like manipulation of oil prices. But this will amount to nothing since OPEC+ isn’t a cartel and it can also retaliate against such action by the US.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert