“There are a lot of alternatives and we haven’t made a decision yet,” Biden told reporters Thursday.
For now, the White House is committed to working with Congress on a bill allowing the United States to sue oil cartels for violating antitrust laws, a step that lawmakers on both sides of the aisle have already threatened but which the Biden administration has been reluctant to take. .
“This is really the first time we’ve had a president backing him up with a Congress that looks likely to back him up as well,” said Kevin Book, chief executive of ClearView Energy Partners, a research firm. “What was unthinkable before is no longer so.”
Senate Democrats are also considering taking action. “We are reviewing all legislative tools to best address this appalling and deeply cynical action,” Majority Leader Chuck Schumer said in a statement.
The rest of the options menu under discussion ranges from flawed to disastrous, market analysts tell POLITICO.
Their consensus view is that policy actions that would actually bring gasoline prices down will require long-term planning, so the best thing lawmakers can do for energy markets now is shut up.
For perspective, oil prices are still below $90 a barrel, down from $122 in June. And gasoline prices, while high at a national average of $3.891 a gallon as of Friday, don’t appear to be sparking the kind of widespread voter outrage seen earlier this summer.
Biden could be best served by playing it cool when it comes to OPEC and accentuating the positive when it comes to steering the country away from oil, some analysts have said.
“In the absence of good measures, I think it would be better not to say too much,” said Rachel Ziemba, deputy principal researcher at the think tank Center for a New American Security, in an interview. Instead, she said, Democrats should focus on what they’ve done to reduce U.S. oil dependence through last year’s bipartisan Infrastructure Act and the on the reduction in inflation that Biden signed this year.
Ahead of Wednesday’s OPEC+ meeting, “a lot of people were raising the bar” on the severity of the oil cuts, Ziemba said. “If anything, that might have overstated the impact of the cuts.”
Absent muzzling, these are steps Biden and other Democrats have offered so far as potential ideas for responding to the cartel:
Just say NOPEC
The White House pledged on Thursday to “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” an apparent reference to a bill that lawmakers from both parties have repeatedly proposed in recent years.
The so-called NOPEC — No Oil Producing and Exporting Cartels — bill would change antitrust laws to allow the Justice Department to prosecute nations that restrict trade in oil, natural gas, or any petroleum product.
The law project, Art. 977 (117), easily erased the Senate Judiciary Committee on a bipartisan basis in May. Schumer has yet to say whether he will bring the measure to the ground, amid a packed to-do list when the Senate returns after the November election.
Judiciary Chairman Dick Durbin (D-Ill.), echoing calls from Republican Sen. Chuck Grassley of Iowa, is calling on Congress to pass the measure before the end of the year.
“It is time for our foreign policy to imagine a world without this alliance with these royal traitors,” Durbin said in a statement.
It’s unclear whether Republicans, however, will be eager to help Democrats solve their OPEC problem at a time when the GOP accuses Biden’s policies of causing high fuel prices by limiting oil leasing and gas on federal lands.
Some Republicans have scoffed at Biden’s vow to consult Congress on OPEC’s response, saying Democrats need to show a willingness to increase drilling at home.
“Unless their consultation includes an openness to some level of increased domestic production, those are words,” said Dan Kunsman, chief of staff to Sen. John Barrasso of Wyoming, the committee’s top Republican. energy and natural resources.
The threat of NOPEC and similar legislation could serve as a fastball to fend off OPEC on occasion, analysts said. But adopting it and initiating lawsuits against OPEC members would lead to a new level of antagonism between the United States and the cartel, which could spook oil markets. It also wouldn’t necessarily lower prices at the pump anytime soon, analysts say.
Reduce gasoline shipments to the United States
The Energy Department has been jousting with oil companies for months over the idea of temporarily limiting the amount of fuel exported from the United States, a figure that now stands at around 4 million barrels a day.
The Energy Department says the fuel could be better used to replenish regional inventories inside the United States, which are below the seasonal average. Amos Hochstein, the State Department’s senior energy security adviser, is looking into the option, people familiar with the effort told POLITICO.
The problem with this idea? The U.S. refining industry is operating at reduced capacity as older plants that have been running at full capacity for months have suffered production problems and many have been forced into maintenance. With demand remaining strong, by and large, every drop of fuel is making its way to consumers, including those living in allied countries that have seen their domestic prices jump as they drift away from Russian supplies. Removing this fuel from the global market would almost inevitably lead to higher prices and the wrath of Europe, where a large percentage of US diesel goes.
“The United States could stop exporting refined products – as has been proposed – or it could even reduce or stop crude oil exports and make them illegal again,” strategist Bob Ryan said via email. in charge of raw materials and energy at the analysis firm BCA. “Either of these would be extremely disruptive to global energy markets.”
Open a strategic fuel reserve
The United States has one for crude oil, and Biden has released more than 170 million barrels of it this year. But he has no stock of gasoline or diesel fuel.
The problem with this idea is that gasoline has a much shorter shelf life than oil – it usually needs to be used up within six months before it starts to deteriorate. This means that any reserve would require constant fuel swapping to ensure everything stays fresh. A reserve should also take into account the different types of gasoline sold in various regions.
For those reasons, a strategic fuel reserve would be “a Rube Goldberg machine,” said Rory Johnston, founder of analyst firm Commodity Context. “You’re very unlikely to get the right products” for long-term storage.
Easing sanctions against Iran and Venezuela
Probably one of the most politically risky moves could also be the most likely to lower crude prices. Lifting economic sanctions that prevent Venezuela and Iran from exporting oil would bring more supply to the market and ease pressure on supplies, experts said.
The administration has launched efforts to negotiate with these regimes, especially when domestic fuel prices rise. But reaching any type of agreement that is politically and politically acceptable will take time.
“I think there is now a clear incentive to ease sanctions against several oil producers like Venezuela,” Christophe Barraud, chief economist at global investment research firm Market Securities, said by email. “The issue of an Iranian nuclear deal will be on the table again. New provisional negotiations will therefore probably be the main focus in the coming weeks. »
Produce more fuel at home
Republicans used the OPEC announcement to disparage the Biden administration’s energy policies, saying the country had been “energy independent” under President Donald Trump.
This characterization is not entirely accurate, even though the United States has become a net oil exporter under Trump and remains so under Biden, shipping more crude and refined products than it imports. Oil prices – the most important factor in gasoline and diesel costs – are determined in the global market, so any disruption affects prices wherever fuels are burned.
“The idea that increased oil production and exports at a higher price will protect us from an oil market determined by the balance of global supply and demand would fail a class of economics first year”, Representative Sean Casten (D-Ill.) said in an interview.
The Biden administration, much to the annoyance of environmental groups, has routinely issued permits for oil and gas drilling on public land, and has seen its calls to stop new drilling on public land blocked by the courts and the government. Congress.
Given that, there’s not much the administration can do with domestic oil production regulations that would offset OPEC cuts, CommodityContext’s Johnston said.
“American industry will say tax cuts or regulatory easing or whatever,” Johnston said. But at the end of the day, he added, “federal policy isn’t the decisive thing that’s going to move the trajectory of American production.”
Drawing military support from Saudi Arabia
Particularly angry Democrats have vowed to go beyond energy in retaliation against OPEC. Rep. Tom Malinowski (DN.J.) is proposing legislation to withdraw U.S. troops and defense systems from Saudi Arabia, OPEC’s largest exporter and most influential member.
This would bring a downside, however, as the move would represent a radical strategic shift in the US security apparatus in the region.
“There must be specific actions against Saudi Arabia,” Rep. Ro Khanna (D-California) said in an interview. “I am open to proposals from the administration on things that can weaken OPEC. But we need more than that. We have done so much for the Saudis and they cannot help during an energy crisis? It’s absurd and it’s really offensive to the American people.