Joe Biden urges OPEC+ to increase oil production to curb rising prices

Summary

• White House has called on OPEC+ to bolster crude oil production to ease the pressure of rising fuel prices.
• The soaring gasoline prices are proving to be a hindrance to the economic recovery worldwide.
• The oil cartel had put a production cut since the crude oil prices bottomed last year.

In a significant event, the White House has urged the oil-producing nations group, OPEC+,  to boost production from the current level to curb the rising crude oil prices.

The WTI crude September futures contract is currently trading at US$69.36 per barrel. However, the prices had come down from their 52-week high of US$75.3/bbl last month.

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Joe Biden’s administration believes that the rising crude oil prices are a threat to the recovery of the global economy. The American President is vocal on climate change and the usage of fossil fuels. The administration has had a crackdown on shale oil and even limited the drilling operations in the US. But the wish to increase production would involve drilling more wells and bringing more supplies to the market and, therefore, more carbon emissions.

Production cut decision of OPEC+

The oil cartel OPEC+ had imposed sanctions on crude oil production by the member nations. The decision of production cut of 10 million barrels of oil per day or nearly 10% of global demand was put into effect after the oil slumped to rock bottom as demand vanished during the pandemic’s peak.

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The member nations of OPEC+ have decided to reduce the level of cuts gradually. As per the last update, out of 10 million barrels, 5.8 million barrels per day of cut is still in existence. The next meeting of OPEC+ is scheduled for September 2021, and a decision on production output could be taken in the meeting.

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Gasoline prices surge over US$3.18/gallon in the US

The fuel prices in the US are skyrocketing, and the general population is reeling under the fear of more inflation in the coming days. The Biden administration wants to lower the crude oil by supplying more crude oil to the market. This will ease the pressure on several industries, and prices would come down eventually.

Mr Jake Sullivan, National Security Advisor (NSA), has criticised the OPEC+ stand on oil production and said the oil-producing nations are not doing enough to help the global economy to recover.

Cut fuel prices vs battle against climate change

The Biden Administration’s call for more crude oil production is being criticised by many. His stance on supporting renewable and putting sanctions on domestic oil and gas projects do not go with his opinion on global recovery through lowering crude oil prices.

It is important to note that the US administration has not called or requested domestic producers to enhance their output. The US domestic output is kept in a range of 11 million bpd.

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