Biden’s OPEC+ Denial, Hurricane Ida Add to Storm of Unpredictable Oil Prices
Prices Linger at 7-Year High as Foreign Oil Manufacturers Hold Reins on Supply
In the face of continually rising gas prices throughout the United States and a push for his $1.2 trillion infrastructure bill prioritizing clean energy, President Joe Biden called on OPEC+ leaders in July to increase oil production to aid in “global recovery.”
This month, OPEC+ subsequently denied the request, which called for Middle Eastern producers and their allies to pump above and beyond the most recent increase of 400,000 barrels per day, prompting staunch criticism across the aisle.
According to CNN, timing of the denial is “particularly problematic” due to its likelihood to “amplify inflation fears and hit Americans in the wallet just as consumer spending drives the economic recovery from Covid.”
Now at a seven-year high, gas prices are showing no signs of decreasing. Hurricane Ida, which made landfall on the Gulf Coast in late August, isn’t expected to do any favors to the issue either.
Bringing with it winds up to 150 miles per hour, the Category 4 storm halted operations at Louisiana Offshore Oil Port (LOOP), the largest privately owned crude terminal in the country, further impacting supply.
“The Louisiana port is the only U.S. deepwater terminal capable of offloading supertankers,” according to Reuters. “It handles 10% to 15% of the country’s domestic oil, and is also connected to about half of the U.S. refining capacity. … It services 90% of the Gulf of Mexico’s deepwater oil production.”
The Bureau of Safety and Environmental Performance estimated that just over 90% of total oil production and 85% of natural gas production in the Gulf of Mexico was offline due to the storm, further complicating supply, demand, pricing, and everything in between.
“Prior to the pandemic in March of 2020, domestic oil production stood at 13 Million bbl/d. Currently we are operating at an 11% shortfall of that with 11.5 Million bbl/d but our consumption rate is near pre-pandemic demand with only being 4% off of our 2019 figures of 20.5 Million bbl/d and 2022 projections show an equal or greater rate of consumption to 2019” said SCL General Manager Travis Becktel. “The problem is a simple function of supply and demand and the fact that the current administration has a strong stance on the future of oil. An increase on the dependency of foreign oil in turn increases OPEC’s ability to determine supply outputs and ultimately the prices we see at the pump.”
OPEC+ has increased production in recent months to aid in global recovery, but Biden’s request called for manufacturers to produce even more – not an unprecedented move by a U.S. president but definitely an unusual one, especially while the administration’s clean energy agenda has taken center stage.
Despite far-reaching uncertainty surrounding oil prices – and questions on the U.S. withdrawal in Afghanistan – there are no plans currently on the table to ease restrictions on domestic producers.
“Right now, there are a lot of unknowns,” Becktel said. “The current rise of the delta variant could further impact prices as well, but right now, we don’t know. What we can do is continue to work on the things that we can control and continue to communicate with our customers on best practice solutions we preach daily regarding operating efficiencies and preventative maintenance. Decisions require the ‘right data,’ so how we can engage with our customers on that data, is how we will both win in the future.”
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