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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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