Washington weighs its options after OPEC’s big oil move

Leaders in Washington have been hot on their heels since OPEC+ announced deep production cuts. However, what might be in the offing when it comes to further policy responses has become clearer in recent days.

“There are plenty of alternatives,” President Biden told reporters Thursday, adding Friday, “I’m not done with that yet.”

On Wednesday, oil-producing nations including Russia announced they would cut output by 2 million barrels a day, saying it was a way to get ahead of a weakening world economy. But many lawmakers in the US immediately worried that a spike in oil prices could provide Russia with an influx of oil revenue to continue its war in Ukraine and hurt Democrats’ chances in the upcoming midterm elections.

President Joe Biden talks to reporters about oil prices Thursday before traveling to New York. (Drew Angerer/Getty Images)

On Thursday, Brian Deese, President Biden’s top economic adviser, said Biden instructed his team to “take nothing off the table” in response.

“There are very few levers that the government can really do [and] if we want to drive down the price of fossil fuels, we need to extract more of them and the administration has really not been supportive of adopting those policies,” Lipow Oil Associates president Andrew Lipow told Yahoo Finance.

Indeed, the price of crude oil has skyrocketed in recent days and, as of Friday, is in sight of the important psychological barrier of $100 a barrel.

4 ideas are being considered by the White House

The Biden administration immediately pulled its most direct lever with Wednesday’s announcement that an additional 10 million barrels would be released from the Strategic Petroleum Reserve in November. The Biden administration has been releasing oil from the reservoir since March and planned to stop this month before extending the deadline.

However, the stockpile is currently at its lowest level in decades, making further releases less likely. In fact, the Department of Energy has made plans to buy additional oil in the coming months to replenish the reserve.

The second focus at play between Biden and his aides is the continued criticism of oil companies for not, in his opinion, lowering retail gas prices enough. “Energy companies need to cut retail prices to reflect the price they pay for wholesale gas,” Deese said Thursday, but Friday’s price increase makes that less likely.

Biden and his aides reportedly had a tense meeting with oil executives last week and are considering, according to Bloomberg, the controversial idea of ​​banning exports of refined oil products. When asked about it on Wednesday, Deese would not comment on the idea specifically, but also did not deny it was being discussed, saying “we have all options on the table.”

Lastly, the Biden administration is continuing its push to cap the price of Russian oil. But the idea has been met with skepticism about how effective it would be and would only cap the price of Russian oil rather than the price Americans pay at the pump.

Potential Capitol Hill Action

There are also possible actions when Congress returns in November.

One idea being considered again is a bipartisan bill that has bounced around Congress for years called “NOPEC,” which advanced in the Senate earlier this year. The bill would remove sovereign immunity and authorize the Justice Department to file lawsuits against OPEC+ members for antitrust violations.

The Biden administration was cool on the bill, but a White House statement on Wednesday signaled further openness saying the administration “will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices”.

A new effort was proposed this week that would force the withdrawal of US troops and missile defense systems from Saudi Arabia and the United Arab Emirates. In a statement, the lawmakers behind that bill said this week that “[w]We see no reason why US troops and contractors should continue to provide this service to countries that are actively working against us.”

Saudi Arabian Energy Minister Abdulaziz bin Salman gestures during a press conference after the 45th Joint Ministerial Oversight Committee and the 33rd OPEC and Non-OPEC Ministerial Meeting in Vienna, Austria, on October 5 2022. - The OPEC+ oil cartel meets face-to-face for the first time since Covid restrictions were introduced in 2020. (Photo by VLADIMIR SIMICEK/AFP) (Photo by VLADIMIR SIMICEK/AFP via Getty Images)

Saudi Arabia’s Energy Minister Abdulaziz bin Salman, center, during a news conference with other leaders Wednesday after the 33rd OPEC and Non-OPEC Ministerial Meeting in Vienna, Austria. (VLADIMIR SIMICEK/AFP via Getty Images)

Republicans have largely chosen to focus on the Biden administration’s lack of efforts to stimulate US oil production. “If ever there was a time for the Biden administration to change course and work with our energy, rather than against them, is now,” Sen. Lisa Murkowski (R-AK) said this week.

In a CNN interview Thursday, Biden’s top energy aide, Amos Hochstein, pushed back on the criticism. “We have already seen production increases of around half a million barrels a day by US industry. [and] we expect them to increase until 2023,” Hochstein said.

“We’re going to do everything we can to make sure that a small number of countries don’t affect the American consumer,” he added.

the Venezuelan question

The other key pending question is what actions Biden will take regarding Venezuela. The Wall Street Journal reported Wednesday that the United States is seeking to ease sanctions on Venezuela to allow Chevron to continue producing there and pumping more oil to world markets. The White House has denied the plans with Hochstein saying “we haven’t made any decisions there.”

This week, President Biden added that Venezuela and its president, Nicolás Maduro, would have “a lot” to do before his administration would consider easing sanctions.

During an appearance on Yahoo Finance Live on Thursday, Prosper Trading Academy CEO Scott Bauer said that even if it were to happen “that effect isn’t going to come quickly either, the state of drilling is in shambles in Venezuela” and it would take 3-3 months. 6 months before it had an impact on the offer.

Venezuela's President Nicolas Maduro gestures as he meets with Colombian Foreign Minister Alvaro Leyva at the Miraflores Palace in Caracas, Venezuela October 4, 2022. REUTERS/Leonardo Fernandez Viloria

Venezuelan President Nicolás Maduro during a meeting with Colombian Foreign Minister Álvaro Leyva in Caracas on October 4. (REUTERS/Leonardo Fernandez Viloria)

Biden also defended his recent trip to Saudi Arabia again, and the fist bump with Crown Prince Mohammed bin Salman, stating that it was not about oil, but acknowledging that this week’s supply movement “is a disappointment and says there is problems”.

It is likely to be a rough few months for oil markets in the coming weeks. “There is going to be a war here between what the US and the EU can do [and] what the Saudis and the rest of OPEC can do to protect their market by actually cutting production,” Energy World founder Dan Dicker said this week.

Ben Werschkul is the Washington correspondent for Yahoo Finance.

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