The latest move in that energy two-step is the administration’s request that the Organization of the Petroleum Exporting Countries (OPEC) ramp up its oil production while advancing domestic policies designed, directly or indirectly, to curtail such production stateside.
Last week, White House National Security advisor Jake Sullivan implored OPEC to increase its production before the agreed-upon escalation set for 2022. “Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery,” Sullivan said.
“The price of crude oil has been higher than it was at the end of 2019, before the onset of the pandemic.”
One barrel of crude oil is currently selling in the mid-to high-$60s, and reached as high as $75 per barrel last month. This price comes after the tumultuous year oil had during the pandemic’s brunt as travel sidelined en masse.
Since then, the price has steadily recovered back toward its pre-pandemic height of mid-$60s. But the high reached last month had not occurred since 2018.
The market is currently in a stage of brazen readjustment. After the price plunge of 2020, producers adjusted their outputs to the lower demand levels. Low demand and high supply creates downward pressure on price. Now, we’re seeing the inverse of that scenario as travel picks back up, but production is slow to adjust — high demand and low supply generates upward pressure on price.
With these higher crude oil prices come higher gasoline prices paid at the pump. And the Biden administration’s concern, as suggested by Sullivan, is that consumer spending will take a hit during what is a still-in-recovery period of economic downturn.
OPEC, however, is not so convinced that the global oil market needs that boost. Before the pandemic really reached the continental U.S., OPEC cut 10 percent of world demand at the time — about 10 million barrels per day.
This global supply dispute occurs during a period of antagonism by the Biden administration against certain aspects of the U.S. fossil fuel industry.
In his first week in office, Biden rescinded the Keystone XL pipeline’s construction permit and prohibited new or renewed drilling permits on federal land. Both affect Texas tangentially due to the state’s status as the epicenter of America’s energy sector, but the latter is estimated to cost 120,000 jobs in Texas.
That order is being fought in court and a district judge issued a temporary injunction pausing its implementation back in June.
Under Biden, the U.S. has also rejoined the Paris Climate Accord — an international agreement to curtail emissions by restricting fossil fuel use with the end goal of preventing a 2-degree Celsius rise in global temperature.
Former President Donald Trump pulled the U.S. out of the accord due to the resulting regulations’ effects on the nation’s energy industry.
Texas produces more crude oil than every other state combined. If Texas were its own country, it’d rank fourth in the world. Since the beginning of the pandemic, the state’s crude output has declined about 13 percent and is only slightly trending toward its pre-pandemic levels.
That said, output is still significantly higher than U.S. output from 1980 to 2010 when Congressional Republicans struck a deal with the Obama administration to lift the crude oil export ban that had existed since 1975.
Removal of that policy opened the proverbial spigots, and American black gold flowed in the regulatory dam’s absence.
Over 400,000 jobs in Texas rely directly on the oil and gas industry and many more benefit subsidiarily.
OPEC has steadily decreased its output since the beginning of 2019 but took it even further at the pandemic’s outset. Because of how intertwined the global crude oil market is — like global markets for any other commodity — the prices Texans pay at the pump is, at least, a corollary of OPEC’s production decisions which in turn affects the U.S.’s.
The price Americans pay at the pump is easily the most comprehensible factor with which the average person is confronted. And the law of supply and demand reigns supreme.
But the Biden administration talks out of both sides of its mouth in discouraging, or even outright restricting, domestic crude oil production while pushing the OPEC envelope.
Disclosure: Unlike almost every other media outlet, The Texan is not beholden to any special interests, does not apply for any type of state or federal funding, and relies exclusively on its readers for financial support. If you’d like to become one of the people we’re financially accountable to, click here to subscribe.
Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.