Breitbart by John Carney 4 Apr 2023
Biden’s Costly Broken Promise on OilThe disastrous energy policy of the Biden administration was highlighted this week by the unexpected announcement of an oil production cut by Saudi Arabian-led OPEC+.
Oil prices surged by as much as eight percent on Monday. Even after dipping a bit on Tuesday, largely on fears of a more sluggish economy, the price of Brent Crude is above $84 a barrel, around 7.7 percent higher than it was on Friday.
Oil prices are predicted to keep rising. Goldman Sachs has oil reaching $95 a barrel by year-end. J.P. Morgan Chase has it going to $96 a barrel. After the Saudi announcement, some analysts pulled their estimates above $100 a barrel, perhaps as early as this summer.
That will mean higher prices at the gas pump for the summer driving season.
The surprise decision to cut crude production followed indications from the Biden administration in late March that it was not interested in imminently refilling supplies depleted out of America’s Strategic Petroleum Reserves (SPR). Energy Secretary Jennifer Granholm said in testimony on Capitol Hill last month that there were technical difficulties making it difficult to replenish the SPR.
This was widely seen as a betrayal of the implicit promise made last year by the White House to put a floor on oil prices by purchasing for the SPR when prices were low. When the Biden administration said it would sell oil from the SPR to bring prices down last year, it also communicated an intention to buy back the oil at lower prices in the future. It was setting itself up as both a seller and a buyer of last resort.
The promise to replenish the SPR was a critical part of the plan to bring oil prices down. Without it, oil producers would likely have reacted to the additional supply coming onto the market by reducing their own production and reducing investment in future production. Foreign oil producers could accept low prices and additional supply now in exchange for additional demand in the future. Domestic oil producers could be reassured that prices would not fall so far as to wipe out investment in additional production.
Even before the OPEC+ announcement, it was clear the Biden administration was blowing whatever credibility it had on oil policy. Liam Denning of Bloomberg wrote:
Last October, following a huge drawdown in the SPR to counter the disruptive effects of Russia’s latest invasion of Ukraine, Biden proposed a rule whereby the government would buy barrels to refill it when prices were “at or below about $67-$72 per barrel.” This would, in theory, act as a free hedge to US oil producers, encouraging them to get drilling. In effect, the SPR would become a true economic buffer stock, releasing barrels when oil prices were uncomfortably high to shield consumers and buying them when they fell low enough to discourage production. Given the US has swung from being a huge net importer of oil to a net exporter, this would usefully repurpose a critical piece of public infrastructure.
More:
https://www.breitbart.com/economy/2023/04/04/breitbart-business-digest-bidens-failed-energy-policy-on-display-in-opec-oil-production-cut/
