The White House will urge OPEC and its oil producing allies to ramp up production to combat soaring gasoline prices amid concerns that soaring inflation could undo Covid’s economic recovery.
Biden government officials spoke to representatives from the de facto leader Saudi Arabia this week, as well as representatives from the United Arab Emirates and other OPEC + members.
The White House said the group’s agreement in July to increase production by 400,000 barrels a day per month starting in August and extending through 2022 was “just not enough” at a “critical moment in global recovery.”
“We are talking to relevant OPEC + members about the importance of competitive markets in setting prices,” said National Security Advisor Jake Sullivan in the statement received from CNBC. “Competitive energy markets will ensure reliable and stable energy supplies and OPEC + needs to do more to support the recovery.”
Gas prices jump
Gas prices have risen this year as demand for petroleum products returns. The national average for a gallon of gasoline was $ 3.186 on Tuesday, according to the AAA, down from $ 3.143 a month ago. In the past year, prices have increased by a little more than $ 1.
In May, the national average topped the $ 3 mark for the first time since 2014.
“The President recognizes that gasoline prices can be a strain on the family budget,” said a senior White House official. “He wants his administration to use whatever tools are available to cut gas costs in order to bring those prices down.”
The rise in gas prices follows a recovery in oil prices. In April 2020, West Texas Intermediate’s crude oil futures, the U.S. oil benchmark, plunged into negative territory for the first time on record as the pandemic weakened demand for petroleum products.
OPEC + made the unprecedented decision in April 2020 to take nearly 10 million barrels a day off the market to support prices while U.S. producers also scaled back production.
These supply cuts, coupled with a recovery in demand, have pushed WTI back above USD 70 a barrel, although the contract has fallen slightly from that level in recent sessions.
OPEC + is still holding back around 6 million barrels a day, which it intends to gradually bring back onto the market. The group’s most recent meeting ended in disarray after the UAE questioned their base quota and briefly upset the oil market. In July, the group finally reached an agreement.
US producers also turned off the tap during the depths of the pandemic and were slow to bring production back online. According to the latest data from the Energy Information Administration, U.S. production averaged 11.2 million bpd in May, from a pre-pandemic peak of over 13 million.
Consumers feel the pain at the pump, and it’s not just gasoline prices that are rising.
The consumer price index for July is released on Wednesday, and economists expect prices to have risen 0.5% in the past month, according to economists polled by Dow Jones. The report follows a 0.9% increase in June, the largest monthly increase since August 2008.
The Biden administration also calls on the Federal Trade Commission to “monitor the US gasoline market” and “combat any illegal behavior that could contribute to price increases for consumers at the pump.”
The National Economic Council’s letter to the FTC calls on the regulator to investigate the factors contributing to the rise in gas prices to ensure consumers are not paying unfair bills.
“With its suite of tools to monitor industry prices, review merger and acquisition activity, conduct market studies, and investigate market manipulation and anticompetitive practices, the FTC is well placed to lead efforts to evaluate events in the US gasoline market and seize them all necessary steps to combat illegal behavior, “the letter said.
The NEC is also calling on the Federal Energy Regulatory Commission, the Commodity Futures Trading Commission, and attorneys general to deal with the issue.
“Knowing that the FTC is closely studying this market could have an impact relatively quickly,” said the senior White House official. “It is worthwhile for the players in this market to recognize that this agency with the enforcement agency is looking closely at what is going on.”
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