Turn on the faucet-and soon.
This is a message sent by the administration of US President Joe Biden to the Organization of Petroleum Exporting Countries (OPEC) and its allies on Wednesday, urging them to take more measures to support the global economic recovery and alleviate the pain that Americans have been experiencing. High oil prices are at the gasoline pumps.
“President Biden has made it clear that he wants Americans to have access to affordable and reliable energy, including at gas stations,” US National Security Adviser Jack Sullivan said in a statement on Wednesday, urging OPEC and its Russian counterparts. The leading ally, OPEC+, further lifted production cuts – and quickly.
“Although OPEC+ recently agreed to increase production, these increases will not completely offset the previous production cuts OPEC+ implemented. [coronavirus] The pandemic is until 2022,” Sullivan said. “At the critical moment of the global recovery, this is not enough. “
On the same day that Sullivan made his statement, US government data showed that gasoline prices in July rose 2.4% from the previous month-this is the second consecutive month of price increases.
The US Bureau of Labor Statistics’ Consumer Price Index shows that, overall, gasoline prices have increased by 41.8% over the same period last year, although some of this can be attributed to the so-called base effect, as the oil demand pandemic broke out last year until 2020. Summer has just begun to spread.
OPEC+ controls more than 50% of the world’s crude oil supply. This makes it have a huge impact on oil prices, and cartels can affect oil prices by increasing or cutting production.
The United States extracts a large amount of crude oil on its own, accounting for about 20% of the world’s total oil production, making it a The world’s largest oil producer, According to the U.S. Energy Information Administration.
But it also consumes a lot of oil-21% of the world’s total. Moreover, its production cost is much higher than that of Saudi Arabia, the largest member of OPEC.
This makes the United States a bit like walking a tightrope on the issue of oil prices: too high, and American consumers feel miserable about oil prices; too low, and American shale oil producers cannot continue to operate because their prices are not competitive.
Sullivan said in a statement on Wednesday: “Although we are not a party to OPEC, the United States will always communicate openly and privately with international partners on major issues affecting our country’s economy and security.”
“We are in contact with relevant OPEC+ members on the importance of competitive markets in setting prices. A highly competitive energy market will ensure a reliable and stable energy supply, and OPEC+ must take more measures to support the recovery,” he added road.
For the oil industry, this is a turbulent period. When the pandemic broke out in March 2020, as global oil demand fell by about a third, prices plummeted.Saudi Arabia then had a total collapse Initiate a price war After the two oil producers were unable to agree on production cut targets to support prices, Russia and Russia reached a consensus.
Price war Tensed relationship for 75 years Between the United States and Saudi Arabia. Higher-cost U.S. shale oil producers are facing an existential crisis, and many of them are heavily in debt. In April 2020, as the world’s oil flooded, the U.S. benchmark crude oil price turned negative because traders paid for the oil to take away from them instead of scrambling to find a place to store it.
After the then US President Donald Trump conducted diplomatic negotiations, OPEC and its allies agreed to reduce production to 9.7 million barrels per day (bpd), a record low.
This marks a long way to go for the recovery of oil prices. With the reopening of the economy and the recovery of demand, oil prices have begun to rise again.In February of this year, the benchmark global Brent crude oil Exceeding pre-pandemic levels.
In July, OPEC + oil-producing countries agreed to cautiously increase production by 400,000 barrels per day, but due to the surge in the delta variants of the coronavirus and China’s actions to cut production too quickly Blockade parts of the country again To curb the spread of the virus.
At the same time, the U.S. economy is experiencing Soaring inflation This frightened investors-even though Fed Chairman Jerome Powell tried to assure them that this will pass as the pandemic dissipates.
Powell said many times, The U.S. economy is experiencing inflation With the rising rate of coronavirus vaccination, the lifting of pandemic restrictions, the release of pent-up demand from consumers, and the accelerated operations of enterprises across the country, the temporary consequences of bottlenecks in the supply of raw materials and labor.
But high oil prices are likely to put pressure on the US economic recovery and anger consumers, which is part of the reason the White House is now vociferous.
In the United States, August is traditionally the time for Americans to take a vacation on the road before the start of the children’s school year. Nothing can hinder road travel like high gas prices.
According to data from the American Automobile Association, the current average price of unleaded fuel per gallon (4 liters) in the United States is US$3.185, which is higher than US$3.144 a month ago and US$2.174 a year ago. This is still far below the record price of US$4.114 set in the United States in July 2008.
Rising oil prices also have political consequences. It is a strategic move for Biden to require OPEC+ to take more actions. Biden focuses on the 2022 midterm elections, when his party members will be re-elected in Congress.
Inflation, high oil prices, and declining purchasing power may provide another fuel for Republicans, who accused his administration of running the US economy too hot.