Washington weighs its options in the aftermath of OPEC’s big oil move

Washington leaders have been hot on their heels since OPEC+ announced deep production cuts. However, in the last few days it has become clearer what further political reactions could be forthcoming.

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

On Wednesday, oil-producing nations – including Russia – announced they would cut production by 2 million barrels a day, saying it was a way to stay ahead of a flagging global economy. However, many US policymakers were immediately concerned that a rise in oil prices could give Russia an influx of oil revenues to continue its war in Ukraine and hurt the Democrats’ chances in the upcoming midterm elections.

WASHINGTON, DC - OCTOBER 6: US President Joe Biden speaks to reporters before entering Marine One on the South Lawn of the White House October 6, 2022 in Washington, DC.  President Biden travels to Poughkeepsie, New York to tour an IBM facility.  The company has invested $20 billion in the Hudson Valley region over the next 10 years, focusing on semiconductors, computers, artificial intelligence and other programs.  He will also make stops in New York City and New Jersey for Democratic fundraisers.  (Photo by Drew Angerer/Getty Images)

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

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

“There are very few levers that the government can actually do [and] If we’re going to bring down the price of fossil fuels, we need to get more of it out of the ground, and the government really hasn’t been willing to adopt that policy,” Andrew Lipow, president of Lipow Oil Associates, told Yahoo Finance.

Crude oil prices have indeed shot up over the past few days and have been within sight of the key psychological barrier of $100 a barrel since Friday.

4 ideas are is under review 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 reserve since March and planned to stop this month before the deadline is extended.

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

The second approach at play with Biden and his aides is the continued criticism of oil companies for not believing they have cut retail gas prices enough. “Energy companies need to lower retail prices to reflect the price they pay for wholesale gas,” Deese said Thursday, but Friday’s price hike makes that less likely.

Biden and his associates reportedly had a tense meeting with oil executives last week and are considering the controversial idea of ​​an export ban on refined petroleum products, according to Bloomberg. When asked about it on Wednesday, Deese declined to specifically comment on the idea, but neither denied it was discussed, saying, “We have all the options on the table.”

Finally, the Biden administration continues its push to cap the price of Russian oil. But the idea has met with skepticism about its effectiveness and would only cap the price of Russian oil and not the price Americans pay at the pump.

Possible action from Capitol Hill

There are also possible actions when Congress returns in November.

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One idea under renewed scrutiny is a bipartisan bill that has been floating around in Congress for years called “NOPEC,” which was introduced in the Senate earlier this year. The bill would remove state immunity and empower the Justice Department to file lawsuits against members of OPEC+ for antitrust violations.

The Biden administration had remained cool on the bill, but a White House statement on Wednesday signaled more openness, saying the administration would “also consult with Congress about additional tools and agencies to increase OPEC’s control over energy prices.” to reduce”.

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

Saudi Arabia's Energy Minister Abdulaziz bin Salman gestures during a news conference following the 45th Joint Ministerial Monitoring Committee and the 33rd OPEC and Non-OPEC Ministerial Meeting October 5, 2022 in Vienna, Austria.  - Oil cartel OPEC+ is meeting face-to-face for the first time since the Covid curbs were imposed 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 press conference with other leaders on 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 a lack of effort by the Biden administration to boost US oil production. “If there was ever a time for the Biden administration to reverse course and work with our energy producers instead of against them, it’s now,” Sen. Lisa Murkowski (R-AK) said this week.

In a CNN interview on Thursday, Biden’s top energy adviser, Amos Hochstein, pushed back on the criticism. “We have already seen an increase in production of about half a million barrels per day by the US industry [and] We expect these to last until 2023,” said Hochstein.

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“We will do everything we can to ensure that a small number of countries do not affect the American consumer,” he added.

The Venezuela question

The other major open question is what action Biden will take regarding Venezuela. The Wall Street Journal reported Wednesday that the US is trying to ease sanctions on Venezuela so Chevron can continue producing there and pumping more oil to world markets. The White House has denied the plans, with Hochstein saying, “We made no decisions there.”

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

During a Yahoo Finance Live appearance Thursday, Scott Bauer, CEO of Prosper Trading Academy, said that even if it were to happen, “this effect will not happen quickly either, the state of drilling in Venezuela is in shambles” and it would be 3- 6 months before it would impact supply.

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

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

Biden also re-defended his recent trip to Saudi Arabia — and the fist bump with Crown Prince Mohammed bin Salman — claiming it’s not about oil, but acknowledging this week’s supply move “is a disappointment and that there are issues.”

The coming weeks are likely to see some difficult months ahead for the oil markets. “There will 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 really curbing production,” Energy World founder Dan Dicker said this week.

Ben Vershkul is the Washington correspondent for Yahoo Finance.

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