Biden has ‘only bad options’ to lower oil prices
HOUSTON — When President Biden meets Crown Prince Mohammed bin Salman in Saudi Arabia, he will follow in the footsteps of presidents like Jimmy Carter, who flew to Tehran in 1977 to exchange toasts with the Shah of Iran on New Year’s Eve. Year.
Like the prince, the shah was an unelected monarch with a tarnished human rights record. But Mr. Carter was compelled to celebrate with him a cause of great concern to people back home: cheaper gasoline and secure oil supplies.
As Mr. Carter and other presidents have learned, Mr. Biden has few tools to cut costs at the pump, especially when Russia, one of the world’s largest energy producers, unleashed an unprovoked war against a small neighbor. During Mr. Carter’s time, the oil supplies that Western countries needed were threatened by revolutions in the Middle East.
During the 2020 campaign, Mr Biden pledged to make Saudi Arabia a “pariah” for the assassination of prominent dissident Jamal Khashoggi. But officials said last week he planned to visit the kingdom this summer. It was just the latest sign that oil has regained its central place in geopolitics.
Just a few years ago, many lawmakers in Washington and oil and gas executives in Texas were celebrating an energy boom that had made the United States a net exporter of oil and petroleum products and made it more energy independent. With rising prices, this feat now seems illusory.
The United States is the world’s largest producer of oil and natural gas, but it accounts for only about 12% of the world’s oil supply. The price of oil, the main cost of gasoline, can still rise or fall depending on events on the other side of the world. And no president, however powerful or competent, can do much to control it.
These facts are cold comfort for Americans who find that a stop at the gas station can easily cost a hundred dollars, much more than a year ago. When fuel prices rise, consumers demand action and can turn against presidents who seem unwilling or unable to bring them down.
Also in the run-up to the next election when their jobs or their party’s hold on power is at stake, presidents may find it impossible not to try to cajole or beg foreign and domestic oil producers to drill and pump more oil, faster.
“A president has to try,” said Bill Richardson, the Clinton administration’s energy secretary. “Unfortunately, there are only bad options. And all the alternative options are probably worse than asking the Saudis to increase production.
Two other oil-producing nations that could increase production — Iran and Venezuela — are U.S. adversaries that Western sanctions have largely cut off from the world market. Reaching a deal with their leaders without securing major concessions on issues such as nuclear enrichment and democratic reforms would be politically perilous for Mr. Biden.
Energy experts said even Saudi Arabia, which is widely seen as having the most available generating capacity ready for use, could not bring prices down quickly on its own. This is because Russian production is down and could fall much more as European countries reduce their purchases from the country.
“Presidents may be the most powerful figure in the US government, but they can’t control the price of oil at the pump,” said Chase Untermeyer, US ambassador to Qatar in the George W. Bush administration. “Even if prices go down for reasons beyond his control, President Biden probably won’t get much credit for it either.”
Some Republican lawmakers and oil executives have argued that Mr. Biden could do more to boost domestic oil and gas production by opening up more federal lands and waters to oil drilling in places like Alaska and the Gulf of Mexico. He could also ease regulations on building pipelines so Canadian producers can send more oil south.
But even those moves — which environmentalists and many Democrats oppose because they would set back efforts to tackle climate change — would have little immediate impact because it takes months for new oil wells to start producing. and pipelines can take years to build.
“If the administration accepted all aspects of the industry wish list, it would have a modest impact on current prices, as it would be primarily future production,” said Jason Bordoff, director of the Center for Global Energy from Columbia University. policy and was an adviser to President Barack Obama. “And it would cause substantial political, social and environmental disadvantages.”
Mr Biden and his aides have pushed US oil executives to pump more oil with little success. Most oil companies are reluctant to increase production because they fear the extra drilling will lead to a glut that will drive prices down. They remember when oil prices fell below zero at the start of the pandemic. Big companies like Exxon Mobil, Chevron, BP and Shell have largely stuck to the capital budgets they set last year before Russia invaded Ukraine.
The Russian-Ukrainian War and the World Economy
A large-scale conflict. Russia’s invasion of Ukraine had a ripple effect around the world, adding to the woes of the stock market. The conflict has caused skyrocketing gas prices and product shortages, and is pushing Europe to reconsider its dependence on Russian energy sources.
Energy traders have become so convinced that supply will remain tight that prices for US and global oil benchmarks have soared after news broke that Mr Biden was planning to visit Saudi Arabia. Oil prices hit around $120 a barrel on Friday, and the national average price for a gallon of regular gasoline was $4.85 on Sunday, according to AAA, more than 20 cents higher than a week earlier. and $1.80 more than a year ago.
Another Biden administration effort that has appeared to fail is the decision to release one million barrels of oil per day from the Strategic Petroleum Reserve. Analysts said it was difficult to discern the impact of these releases.
Biden’s team has also been in talks with Venezuela and Iran, but progress has stalled.
The administration recently renewed a license that partially exempts Chevron from U.S. sanctions aimed at crippling Venezuela’s oil industry. In March, three administration officials traveled to Caracas to drag President Nicolás Maduro into negotiations with the political opposition.
In another easing of sanctions, Repsol of Spain and Eni of Italy could start shipping small amounts of oil from Venezuela to Europe within weeks, Reuters reported on Sunday.
Venezuela, once a major exporter to the United States, has the largest oil reserves in the world. But its oil industry has been so crippled that it could take months or even years for the country to significantly increase its exports.
With Iran, Mr. Biden is seeking to revive a 2015 nuclear deal from which President Donald J. Trump pulled out. A deal could allow Iran to export more than 500,000 barrels of oil a day, easing the global supply shortage and offsetting some of the barrels that Russia is not selling. Iran also has about 100 million barrels in storage, which could potentially be released quickly.
But the nuclear talks seem mired in disagreements and are unlikely to bear fruit anytime soon.
Of course, any deal with Venezuela or Iran could itself become a political liability for Mr. Biden, as most Republicans and even some Democrats oppose compromises with the leaders of those countries.
“No president wants to remove Iran’s Revolutionary Guards from the terrorist list,” Ben Cahill, an energy expert at the Center for Strategic and International Studies in Washington, said of one of the points. stumbling block in talks with Iran. “Presidents are wary of any decision that appears to make political sacrifices and give America’s adversaries a victory.”
Foreign policy experts say that while energy crises during war are inevitable, they always seem to surprise administrations, which are usually unprepared for the next crisis. Mr. Bordoff, Obama’s adviser, suggested the country invest more in electric cars and trucks and encourage more efficiency and conservation to reduce energy demand.
“The history of oil crises shows that when there is a crisis, politicians run around like chickens with their heads cut off, trying to figure out what they can do to bring immediate relief to consumers,” Mr. Bordoff. American leaders, he added, must better prepare the country for “the next time there is an inevitable oil crisis.”