National Post (National Edition)
`THE HEIGHT OF HYPOCRISY,' AS U.S. SEEKS MORE OPEC OIL.
THE UNITED STATES WANTS MORE OIL, BUT FROM OPEC RATHER THAN ITS NORTHERN NEIGHBOUR
Dear OPEC members and friends, please pump out more crude oil to help tame high gasoline prices in the United States during the summer driving season.
— Yours truly, the Biden White House.
Yep, you read that right.
The same U.S. president who quickly torpedoed the Keystone XL pipeline now suggests he wants to see more oil produced in the world, at least in the short term.
And Joe Biden wants the crude oil to come from OPEC and the cartel's partners, including Russia.
The U.S. indicated Wednesday the Organization of Petroleum Exporting Countries should bump up oil output to ease gasoline prices. It comes a few days after the president signed an executive order that calls on half of all new vehicles sold in the country to be electric or emissions-free by 2030.
It didn't take long for those in Alberta — the main supplier of imported oil to the U.S. — to roll their eyes.
“It's just the height of hypocrisy, within months of cancelling KXL, to then turn around and ask OPEC to increase production,” Energy Minister Sonya Savage said in an interview.
“You can't have it both ways. You can't ask for increased production at the same time as talking about phasing out fossil fuels.”
In a statement issued on Wednesday, U.S. National Security Advisor Jake Sullivan discussed the need for “reliable and stable global energy markets.”
“While OPEC+ has recently agreed to production increases, these increases will not fully offset previous production cuts,” Sullivan said. “At a critical moment in the global recovery, this is simply not enough.”
In a speech, Biden said that while oil prices are falling, pump prices haven't dropped and OPEC output cuts “should be reversed ... to lower prices for consumers.”
It's funny how lineups at the pumps or rising prices get the attention of politicians as consumers feel the pinch.
U.S. gasoline prices averaged US$3.14 a gallon in July as more motorists returned to the roads and pandemic restrictions eased. It was the highest monthly average price since October 2014, according to the U.S. Energy Information Administration.
But it's not unprecedented. American gasoline prices peaked above $4 a gallon back in July 2008.
And pump prices are expected to fall on their own later this year to average $2.82 per gallon in the fourth quarter, the EIA said in an outlook released Tuesday.
Benchmark U.S. oil prices have increased by more than 40 per cent this year, but have declined from $75 a barrel in mid-July to close at $69.25 on Wednesday.
Last month, OPEC+ countries decided to reverse some of their earlier cuts as global demand increased, bumping up output by 400,000 barrels per day each month, beginning in August.
Even if OPEC agreed to tap into its spare capacity and boost production, it wouldn't have a significant impact on gasoline prices before the summer driving season ends, noted Patrick De Haan, head of petroleum analysis at GasBuddy.
However, with Biden's stance on matters such as Keystone XL, issuing new oil and gas leases on federal lands and promoting electric vehicles, he now “owns the optics behind rising prices,” said De Haan.
“It's a very delicate balance to transition the U.S. to green energy as he'd like to see, but at the same time keeping energy prices in check,” De Haan said.
“He wants to have his cake and eat it, too. I think he will fail on both sides; you can't appease both sides.”
Here's another point to consider: Shouldn't the U.S. administration support economic fundamentals with higher prices sending a signal to consumers to use less gasoline — and, in turn, generate fewer emissions?
Not surprisingly, the call for OPEC to increase output attracted criticism from both sides of a polarized energy debate.
“Biden has been in for six months and immediately cancelled the KXL pipeline that would have come and supplied reliable energy sources from its closest trusted friend and ally in Canada,” said Savage.
Those who want to see less global oil production said this is more evidence of the need for a faster energy transition, not a call for increased supplies or new fossil fuel infrastructure.
“Dumb move,” said Keith Stewart of Greenpeace Canada.
“The way you break the power of OPEC, if that's your goal, is to switch off oil. That's the sustainable solution to this problem.”
You can forgive onlookers for not taking this request too seriously, given the U.S. administration's hostility towards the industry and stated focus on climate concerns.
And it is a serious concern.
As this week's report by the Intergovernmental Panel on Climate Change underscored, global temperatures continue to rise, with UN Secretary-General Antonio Guterres saying the study “must sound a death knell” for coal and fossil fuels.
Production in the U.S. has been falling.
Ensign Energy Services president Bob Geddes, who is also the chair of the International Association of Drilling Contractors, noted U.S. petroleum producers have been spending less money to maintain domestic output, which dropped to 11.2 million barrels per day in May from almost 13 million bpd in January 2020.
“This is where the Biden administration finds itself conflicted,” Geddes said.
“While they are cancelling pipelines and ... cancelling sales of federal leases for drilling, they're making a phone call to Riyadh to up the pumping rate. It's kind of a self-inflicted situation.”
All of the noise about gas prices is just that — noise — and calls for OPEC+ to increase production illustrate the need to elevate the complicated conversation about an energy transition beyond short-term prices.
“The request demonstrates the importance of needing affordable and reliable energy,” said Gurpreet Lail, head of the Petroleum Services Association of Canada.
“At the end of the day, we all need to stop pointing fingers and actually start rolling up our sleeves and work together to resolve this.”