Energy prices are rising. What can Biden do?

Experts said on Friday that high oil and gas prices here are likely to continue for months, raising the question of what President Biden can do to cut costs as he faces pressure from both political parties.

Post-pandemic oil demand and tight supply are pushing the price per barrel to new heights, filling oil investors’ wallets after one of the leanest years in decades. Grip on production by OPEC+, a bloc that includes Saudi Arabia, Russia and other countries, and hesitation from US drills are helping to push robust crude oil prices behind rising gasoline prices, analysts say.

Although prices softened last week, the US benchmark for light sweet crude, West Texas Intermediate, remained at just over $80 a barrel for most of the past month, nearly double its current price. last year. Brent oil, the international price benchmark, stood at $82 a barrel on Friday evening.

Natural gas prices have also risen and are expected to rise as the winter weather kicks in and the demand for residential heating increases. The US Energy Information Administration predicts that residential heating bills will be 50 percent higher than last winter if this season turns colder than average.

The Biden administration has said energy prices are a major factor driving 6.2 percent inflation in the past year, as reported by the Bureau of Labor Statistics.

Last week, the White House said it is looking at “every tool in our arsenal” to combat high gasoline prices, stressing that Biden and his economics team are “quite focused” on the issue.

“We have communicated with the [Federal Trade Commission] To combat illegal pricing, we are working with countries and entities abroad, such as OPEC, to increase supply, and we are reviewing a range of options at our disposal,” White House press secretary Jen Psaki said Friday. .

“We believe that the long-term increase in gas prices is an even stronger case for doubling our investments and focusing on clean energy options so that we are not dependent on the fluctuations and OPEC,” added Psaki later at the meeting. same briefing with reporters.

In CNN’s “State of the Union” yesterday, National Economic Council director Brian Deese reiterated that “we are monitoring the situation very closely” regarding gas prices and said that tapping the strategic petroleum reserve “on the table”.

Biden also last week instructed the National Economic Council to explore ways to cut costs. Other options that have been floated in the energy community include a ban on crude oil exports or the passage of the No Oil Producing and Exporting Cartels (NOPEC) Act, which would allow the Biden administration to sue OPEC.

In a note last week, ClearView Energy Partners said a sale of crude oil from the Strategic Petroleum Reserve is more likely than “dramatic interventions” such as export bans or antitrust or diplomatic action against producers abroad.

But analysts are skeptical of the president’s ability to move the needle on prices.

Phil Flynn, of the Price Futures Group in Chicago, said such an SPR release would be a failure.

“Release from the reserve will only serve to increase demand. It will artificially lower prices in a market where demand is insatiable and fundamentally under-supplied,” he said in an investor note Friday.

“In addition, OPEC would most likely respond with a production cut to match any release from the reserve,” Flynn wrote.

Still, rumors of a White House reaction and a strengthening dollar have helped to cool the oil run-up somewhat, at least temporarily.

“This week is a good reminder for oil markets that prices are affected not only by the supply-demand trajectory, but also by monetary policy forecasts and forms of government intervention,” said Louise Dickson, senior oil market analyst at Rystad Energy. , last week.

“While balances are tight and creating a bullish environment for oil through the end of the year, oil lost dollars in value this week and the reason for this is the fight against inflation,” she said.

The OPEC+ cartel is gradually ramping up production to keep the price of crude oil high, surging budgets that have been chilled by the economic freeze from the COVID-19 pandemic. That’s despite Biden’s unconventional calls for OPEC to unleash more crude and cut energy costs worldwide (energy wire, November 2nd.

In the United States, shale companies return cash to shareholders instead of spending it on new drilling to appease investors. While that discipline isn’t expected to last forever, for now it has prevented shale companies from flooding the market with crude oil that could help drive prices down.

On CNN, Deese said the Congressional budget reconciliation package, which he predicted would pass this week, would address “more than anything else” the inflationary costs facing Americans.

political consequences

With energy prices out of control and inflation hitting all corners of the economy, political mud-slinging is ramping up and the White House is in Republicans’ crosshairs.

“Joe Biden and Democrats in Washington are cheering for higher gas prices. They don’t even hide it anymore. They are pushing for more economic pain in hardworking Americans so they can break through their extreme agenda,” Representative Pete Stauber (R-Minn.) said in a tweet after Psaki’s comments Friday.

Republican Senator John Kennedy of Louisiana said last week that the White House wants to “abruptly end” fossil fuel production in the United States.

“He wants us to buy natural gas and oil from other countries and basically give more money to countries that hate us,” Kennedy said at a news conference.

While Republicans are hitting the White House for its energy priorities, several Democrats have also pressured the administration to keep prices from rising. Eleven Democratic senators, including Patrick Leahy of Vermont and Elizabeth Warren and Ed Markey of Massachusetts, sent a letter to the president last week proposing to release oil barrels from the Strategic Petroleum Reserve and ban exports.

“We hope you consider these and other tools to help make gasoline more affordable for all Americans,” they wrote.

Last week, the Independent Petroleum Association of America, which represents independent oil and natural gas producers, said, “We strongly oppose the use of oil reserves to influence gasoline prices.”

“Market interference makes us all more vulnerable and is counterproductive to long-term adjustments in the market,” IPAA Chief Operating Officer Jeff Eshelman said in a statement Tuesday. “A better solution is to strengthen, not suppress, or shut down America’s leadership in natural gas and oil production.”

Reporters Edward Klump and Ester Wells contributed.