WASHINGTON, Oct 6 (Reuters) – U.S. President Joe Biden this week called on his administration and Congress to explore ways to boost U.S. energy production and reduce OPEC+’s control over energy prices after what he called the cartel’s “short-sighted” production cut.
Rising oil and fuel prices are a big risk for Biden’s fellow Democrats as they seek to retain control of Congress in the Nov. 8 midterm elections and help fuel soaring consumer inflation threatening the economy.
Here are some of the policy options the United States could use as it seeks to lower energy prices and counter the Saudi-led OPEC+ producer group:
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FREEING UP MORE EMERGENCY RESERVES
The administration could decide to release more oil from the Strategic Petroleum Reserve (SPR), an emergency stockpile created after the 1970s Arab oil embargoes that Biden once relied heavily on to control fuel prices.
Earlier this year, the Biden administration announced a record sale of the reserve: 180 million barrels for six months from May, as prices at the pump hit record highs.
The selloff helped lower global energy prices, and the administration found oil demand was lower than expected. Last month, the administration extended the duration of the sale until November, as only around 155 million barrels had been sold.
Even so, the amount of oil in the reserve has fallen to the lowest since July 1984. The SPR still holds far more than the United States is required to under an agreement with allies of the International Agency energy, but significant additional sales from the stock could raise concerns that it is becoming too thin to properly weather another major global supply disruption.
TAKE A CRACK AT OPEC
Biden has pledged to consult with Congress on additional tools to reduce OPEC’s control over energy prices, a potential reference to a decades-long effort to open OPEC to antitrust lawsuits for orchestrating supply cuts.
The so-called NOPEC bill, mooted repeatedly over the past 20 years but never enacted, was easily passed by a Senate committee in May, and several lawmakers have come out in favor of such legislation since the ruling. from OPEC on Wednesday.
Saudi Arabia fears the legislation will one day pass and has lobbied against it. NOPEC could also put pressure on Russia, a member of the broader OPEC+ group that agreed to cut production and faces sanctions after its invasion of Ukraine.
The White House has previously expressed concerns about the unintended consequences of the bill and, despite its public warning about the Saudi-led OPEC+ cut decision, is reluctant to further sever ties with Riyadh, a long-time strategic ally in the Middle East.
Biden’s Department of Energy has repeatedly publicly castigated US oil companies for exporting large amounts of gasoline and other refined products – and raking in huge profits – in an era of energy prices painfully high consumer prices and low national stocks.
This has raised fears in the oil industry that the White House may attempt to impose a ban or limitations on US energy exports, a move they say would undermine free market values and make it harder to compete for businesses.
This week, two major industry groups called on the administration to explicitly rule out export restrictions.
The Department of Energy said the option is not currently being considered, but remains on the table.
The administration has also urged energy companies to increase production of crude and refined products, but analysts and business executives say lifting capacity requires years of investment and regulatory certainty.
The Biden administration has already used a handful of smaller measures to reduce fuel prices, including lifting summer restrictions on high-ethanol blends of gasoline to boost volumes and easing some other environmental requirements. regions to facilitate market supply by refiners.
Other options include a federal gas tax exemption or gas cards that could offer rebates to consumers; possible relaxation of the Jones Act, a law requiring domestic cargo to be carried on American-made tankers using union labor, to expand ocean deliveries; or lifting sanctions on oil-producing countries like Iran and Venezuela to help them increase production.
Each of these ideas is politically heavy, however, and can also have a limited impact on prices.
Biden earlier this year proposed a three-month suspension of the federal gas tax, for example, to help consumers at the pump, but was rejected by lawmakers who thought it would have cost the government too much in loss of income.
Another option: conservation. Americans are by far the biggest gas guzzlers in the world, thanks to big cars, long distances traveled and little public transportation in many areas. But the proposed solutions to this problem are long-term and include measures such as incentives for the purchase of electric vehicles and more investment in buses and commuter trains.
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Written by Richard Valdmanis; edited by Jonathan Oatis
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