So much for bragging about declining gas prices that had actually stopped declining. Joe Biden will likely face a new round of gas-price shocks soon, thanks to what OPEC+ hints will be a “historic” cut in daily production. The apparent goal? To get prices back above $100 a barrel, and perhaps to push back against Western sanctions on Russia.
And without enough production competition from the US, OPEC will likely achieve that quickly:
An influential alliance of some of the world’s most powerful oil producers is reportedly considering their largest output cut since the start of the coronavirus pandemic this week, a historic move that energy analysts say could push oil prices back toward triple digits.
OPEC and non-OPEC producers, a group often referred to as OPEC+, will meet in Vienna, Austria, on Wednesday to decide on the next phase of production policy.
The oil cartel and its allies are considering an output cut of more than a million barrels per day, according to OPEC+ sources who spoke to Reuters.
“The OPEC ministers are not going to come to Austria for the first time in two years to do nothing. So there’s going to be a cut of some historic kind,” Dan Pickering, CIO of Pickering Energy Partners, said, referring to the group’s first in-person meeting since 2020.
Pickering thinks the actual cut will be around 500,000 barrels per day, which will “support the market in the near term.” It hadn’t needed much support this year, especially after the Russian invasion of Ukraine and the need to cut off Vladimir Putin’s income stream. That didn’t work — at least not yet — but oil prices spiked anyway, at least until economic activity declined and demand dropped off.
Oil is still at a price where profit is hardly at risk. The overall price per barrel went up four dollars in morning trading, a blip off the post-invasion bottom but well short of the mid-$90s mean of the past several months. OPEC+ has lost patience with the demand dropoff, apparently, and wants to float the price back up artificially through production cuts.
This will come at a bad moment for Biden, and not just because it will push gas prices back up before the midterms. Biden promised back in July that the Saudis would increase their oil production as a way to show he was on top of the oil markets. The Saudis themselves demurred on that question at the time, and now we know why. This also threatens to complicate efforts by Biden and the EU to construct a weird “cap” on Russian oil, which would have had the effect of pushing that out of the global market to some extent anyway and would have also created higher prices.
Of course, Biden could put the US on a footing that would allow us to dictate not just production levels but also heavily influence oil prices to deny Vladimir Putin his excess revenue stream. Rather than choke off exploration and extraction, Biden could cancel his EO 13990 and reverse his lease-sales policies to encourage more investment in oil and natural gas production. That would unleash massive new resources for both domestic use and export, and even the initial steps would shock oil futures markets into accounting for sudden new production levels from the US. Biden won’t do it, however, because he’s more in thrall of his progressive-environmental Left than he is focused on economic and strategic national-security concerns.
So once again, we’ll be dancing to any tune that OPEC+ plays. It’s yet another reminder of Joe Biden’s 1970s revival in all the wrong ways.