After the OPEC cartel said Wednesday it would cut oil production, congressional Republicans criticized the Biden administration’s energy policy, Sen. Joe Manchin III used the moment to pitch his stalled permitting proposal and other Democrats said the development underscores the need to break from fossil fuels.
At a meeting at OPEC headquarters in Vienna, Austria, the bloc of oil-producing nations, with support from Russia, said it would cut production by 2 million barrels per day beginning in November.
Within the administration, national security adviser Jake Sullivan and National Economic Council Director Brian Deese criticized the decision, calling it “shortsighted” and a response to the Russian invasion of Ukraine. As oil prices ticked up in the hours following the announcement, the pair said the administration would consult with Congress on strategies to blunt OPEC’s control over global oil prices.
The cartel’s decision drew diverging strategies and approaches from Democrats and Republicans in Congress over how to rein in oil prices and how the U.S., the top generator of oil and gas of any country in the world, should use its supplies.
Rep. Cathy McMorris Rodgers of Washington, the top Republican on the House Energy and Commerce Committee, said the Biden administration should increase oil production to lower oil prices, which have carried over to raise the cost of food and other consumer goods.
Bloomberg News reported Tuesday that White House officials asked the Energy Department to analyze the impact of a ban on the export of refined oil products such as gasoline and diesel fuel as a way to hold down U.S. pump prices.
“The hardworking people of this country are paying the price,” Rodgers said. “President Biden must reverse course and take meaningful action to unleash American energy.”
Rodgers argued against initiating a ban on U.S. oil exports. “I am warning this administration to not use this as an excuse to ban American exports or further their radical energy transition,” she said.
A bipartisan pair of senators — Democrat Chris Van Hollen of Maryland and Republican Patrick J. Toomey of Pennsylvania — called attention to their legislation to allow the administration to levy new economic sanctions against Russia for its invasion of Ukraine.
Their amendment would let the executive branch bring sanctions against foreign parties that buy Russian oil and gasoline.
The American Petroleum Institute and American Fuel & Petrochemical Manufacturers told the administration on Tuesday that it should not ban or limit the export of refined petroleum products in order to build domestic inventories of gasoline and diesel.
“Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war,” the fossil fuel energy groups wrote Energy Secretary Jennifer M. Granholm. “For these reasons, we urge the Biden administration to take this option off the table and focus instead on working with us on policies that will strengthen U.S. energy security and protect consumers.”
Domestic production
Refineries produce more fuels than are used domestically, allowing the United States to be a net exporter to provide stable and affordable energy supplies to its allies, the two groups said. The U.S. has 18 million barrels per day of refining capacity, and about 3.5 million barrels of gasoline, diesel and other products are exported daily.
“Restricting these exports would cut off important supply from the international market, putting upward pressure on prices, threatening the global flow of essential energy, undermining U.S. allies and creating negative global economic consequences, including here in the United States,” API and AFPM said.
The impact of cuts in production targets would be diminished because OPEC has already been short of its goals this year due to embargoes on Russian supplies after its invasion of Ukraine, as well as other issues like continued problems restarting Libyan exports, University of Houston professor Ed Hirs said in an interview.
“They’re angling to keep prices north of $80,” Hirs said. “Part of this is probably precautionary. No. 1, they see the U.S. as potentially heading into a recession. They see the E.U. heading into a recession. China’s economy is still quite soft because of their internal COVID restrictions.”
Cuts anticipated
The market was already anticipating cuts from the group, known as OPEC+, as oil prices have gone up $10 per barrel since last weekend, said Mark Finley, a Rice University fellow in energy.
“Where it goes from here will depend on how successfully the cuts are implemented, what happens to Russian supplies, and a range of other factors that all add up to the balance of global supply and demand,” Finley said.
The Department of Energy will release another 10 million barrels of oil from the Strategic Petroleum Reserve next month, continuing a policy in place since March.
Manchin, D-W.Va., chairman of the Senate Energy and Natural Resources Committee, said the U.S. should increase energy production in response to the announced OPEC cut highlights.
“We have been blessed with an abundance of domestic energy resources, which we can produce cleaner than elsewhere in the world, and with that we have the ability to ensure energy independence and security for ourselves and our allies,” said Manchin, a frequent Senate swing vote.
He also said the bloc’s maneuver shows why the Senate should reconsider his permitting proposal, which among several steps would limit environmental permitting timelines, rewrite federal water laws and approve a gas pipeline in his home state.
[With Manchin’s bill aside, other permitting proposals await]
“This announcement should serve to further motivate my colleagues in Congress to come to the table to pass comprehensive, bipartisan permitting reform to lessen our dependence on these foreign nations,” Manchin said.
The Mountain Valley Pipeline broke ground in 2018 but has not acquired the required federal permits to operate and has lost court cases in a federal appeals court in Virginia about its local pollution problems due to the project.
On the heels of the OPEC decision, Sen. Edward J. Markey, D-Mass., said he will introduce legislation to direct the president to consult with OPEC member nations and other non-OPEC oil-producing nations that coordinate with the bloc in an effort to break the OPEC’s stranglehold over the global oil market.
If that effort were unsuccessful, the bill would direct the U.S. Trade Representative to begin a dispute over trade at the World Trade Organization.
“Today’s OPEC announcement is a reminder that as long the United States is dependent on foreign oil and on domestic oil that is priced on a global market, the supply and cost of the energy Americans use to operate our cars, heat our homes, and power our economy is reliant on decisions made by and for hostile fossil-fueled regimes,” Markey said.
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