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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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White House Disappointed With OPEC’s ‘Shortsighted’ Decision

  • U.S. President Biden is disappointed by the shortsighted decision by OPEC+ to cut production quota.
  • The Biden Administration vows to find new ways to temper OPEC’s control over energy prices.
  • The American Petroleum Institute has criticized the administration’s energy policies, saying that dependence on OPEC and other foreign countries for our energy is a “choice”.

A White House statement following the OPEC+ decision to defy the Biden administration with an output cut for November vows to find new ways to temper OPEC’s control over energy prices.

Earlier on Wednesday, members of OPEC+ said they would cut November production quotas by 2 million bpd, citing the “uncertainty that surrounds the global economic and oil market outlooks”.

The decision immediately led to a more than 2% increase in Brent crude and WTI prices and goes directly against the Biden administration’s attempts to lobby Saudi Arabia for higher production to bring prices down.

Shortly after the release of an OPEC+ press release detailing the output cuts, the White House said, “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.”

“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,” two of Biden’s top aides, national security adviser Jake Sullivan and National Economic Council Director Brian Deese, said in a statement.

The White House warned that the OPEC move would “have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices”.

In the meantime, the American Petroleum Institute (API) has criticized the administration’s energy policies, saying that dependence on OPEC and other foreign countries for our energy is a “choice”.

“We need to have stable energy sources that are from the United States to ensure that we have reliable and affordable energy here at home. Unfortunately right now, the United States is about 1 million barrels of production down from where we were in 2019. That was a choice,” API president Mike Sommers told Fox News.

The OPEC decision comes as the U.S. Department of Energy is reportedly being tasked by the White House to investigate whether a ban on gasoline exports would bring costs down for American consumers at the pump.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on October 05 2022 said:
    OPEC+'s decision to cut production is not short-sighted at all. Any decisions the organization takes are always aimed at maintaining the balance in the global oil market between supply and demand and defending the interests of its members. OPEC+ members with the exception of Russia need a Brent crude oil price of $100 a barrel to balance their budgets.

    OPEC+ decision to defend the interests of its members isn’t different from the repeated attempts of the Biden administration to persuade the organization to increase production so as to prevent the price of gasoline in the US from shooting up. So if the administration describes OPEC+'s cut as short-sighted, then by the same token its repeated attempts are equally short-sighted.

    Moreover, the decision exposes the United States’ impotence in offsetting the OPEC+ cut with increased supplies of its own. US shale oil is a spent force. It neither can raise its production to fill any gap resulting from the OPEC+ cut nor would the United States release more oil from its strategic petroleum reserve (SPR). The SPR, currently at 427 million barrels, is at its lowest since 1984. Furthermore, the US Department of Energy (DoE) will find it virtually impossible to replace previous SPR releases because of the tightness of the market.

    Shortly after OPEC+'s decision, the White House issued an implied threat to OPEC+ that the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC's control over energy prices possibly hinting at using the NOPEC Bill” if necessary to sue the organization 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
  • independence01776 d on October 06 2022 said:
    OPEC finds itself in an impossible position: raise supply and prices drop, lower supply to keep prices high and the US fracking industry increases supply to take advantage of the higher prices. With China and Europe fast shifting to electric vehicles, and the continued high prices for oil and gas, the US is starting to follow their trend. Electric vehicles are fast becoming the norm and will be near one-quarter of new car sales in 2023. Oil consumption which peaked in 2019 will continue to see decline because of this trend. As a result, OPEC’s control of the energy market will continue to decline, and this will accelerate over the next 5 years. Suffering from declining sales and lower revenue the oil cartel will likely lead to political instability in the region. The same is occurring in Russia as we speak. The best thing for the world is to move off fossil fuels as fast as possible to remove the economic influence of these autocratic regimes, and the negative impact to the environment. Hopefully they will transition to sustainable democratic institutions and free market policies that allow their populations to improve their lives. It’s going to be a difficult transition for them.

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