Biden has ‘only bad options’ to cut oil prices

HOUSTON — When President Biden meets Crown Prince Mohammed bin Salman in Saudi Arabia, he follows in the footsteps of presidents like Jimmy Carter, who flew to Tehran in 1977 to exchange New Year’s Eve toast with the Shah of Iran.

Like the Prince, the Shah was an unelected monarch with a tarnished human rights record. But Mr. Carter had to celebrate with him for a cause that had people at home very concerned: cheaper gas and safe oil supplies.

As Mr. Carter and other presidents have learned, Mr. Biden has very little resources to cut costs at the pump, especially when Russia, one of the world’s largest energy producers, has launched an unprovoked war against a smaller neighbor. In the time of Mr. Carter, the oil supplies needed by Western countries were threatened by revolutions in the Middle East.

During the 2020 campaign, Mr Biden pledged to make Saudi Arabia a “pariah.” But officials said last week that he plans to visit the kingdom this summer. It was just the latest sign that oil has regained a central place in geopolitics.

Just a few years ago, many Washington lawmakers and Texas oil and gas executives patted themselves on the back for an energy boom that had made the United States a net exporter of oil and petroleum products and made it more energy independent. With prices rising, that feat now seems an illusion.

The United States is the world’s largest oil and natural gas producer, but accounts for only about 12 percent of the global petroleum supply. The price of oil, the main cost of gasoline, could still rise or fall depending on events halfway around the world. And no president, no matter how powerful or capable, can do much to bring it under control.

Those facts are cold comfort to Americans who find that a stop at the gas station can easily cost a hundred dollars, much more than a year earlier. When fuel prices rise, consumers demand action and may turn against presidents who seem unwilling or unable to bring them back.

Always looking ahead to the next election when their jobs or their party’s power is at stake, presidents may find it impossible not to try to flatter or beg foreign and domestic oil producers to drill more oil and pump it faster.

“A president has to try,” said Bill Richardson, secretary of energy in the Clinton administration. “Unfortunately, there are only bad options. And any alternative options are probably worse than the Saudis are asking to increase production.”

Two other oil-producing countries that could increase production — Iran and Venezuela — are US adversaries largely cut from global markets by Western sanctions. Making a deal with their leaders without making major concessions on things like nuclear enrichment and democratic reforms would be politically dangerous for Mr Biden.

Energy experts said that even Saudi Arabia, which is widely believed to have the most spare production capacity ready to go into operation, cannot cut prices quickly on its own. That’s because Russian production is on the decline and could fall much further if European countries cut their purchases from the country.

“Presidents may be the most powerful figures in the US administration, but they can’t control the price of oil at the pump,” said Chase Untermeyer, US ambassador to Qatar in George W. Bush’s administration. “Even if prices fall for reasons beyond his control, President Biden probably won’t get much credit for it either.”

Some Republican lawmakers and oil executives have argued that Biden could do more to increase domestic oil and gas production by opening more federal lands and waters to oil drilling in places like Alaska and the Gulf of Mexico. He could also relax pipeline regulations to allow Canadian producers to send more oil south.

But even those initiatives — which environmentalists and many Democrats oppose because they would slow efforts to fight climate change — would have little immediate impact, as it takes months for new oil wells to start producing and pipelines can take years to build.

“If the government were to accede to every aspect of the industry’s wish list, it would have a modest impact on current prices, as it would mostly be manufacturing going forward,” said Jason Bordoff, director of the Center for Global Energy. from Columbia University. Policy and was an adviser to President Barack Obama. “And it would entail significant political, social and environmental disadvantages.”

Mr. Biden and his aides have enticed US oil executives into pumping more oil with little success. Most oil companies are hesitant to expand production, fearing that more drilling will lead to a glut that will drive prices down. They remember when the oil price dropped below zero at the start of the pandemic. Major companies like Exxon Mobil, Chevron, BP and Shell have largely stuck to the investment budgets they set last year before Russia invaded Ukraine.

Energy traders have become so convinced that supply will remain limited that prices of the US and global oil benchmarks rose after news broke that Mr Biden was planning to travel to Saudi Arabia. Oil prices rose to about $120 a barrel on Friday and the national average price for a gallon of regular gasoline was $4.85 on Sunday, according to AAA, more than 20 cents higher than a week earlier and $1.80 more than a year ago.

Another effort by the Biden administration that appears to be failing is the decision to release one million barrels of oil from the Strategic Petroleum Reserve every day. Analysts said it was difficult to discern any impact from those releases.

The Biden team has also been in talks with Venezuela and Iran, but progress is stalling.

The government recently extended a permit that partially exempts Chevron from US sanctions aimed at crippling Venezuela’s oil industry. In March, three government officials traveled to Caracas to involve President Nicolás Maduro in negotiations with the political opposition.

In another easing of sanctions, Repsol of Spain and Eni of Italy could begin shipping small amounts of oil from Venezuela to Europe within weeks, Reuters reported Sunday.

Venezuela, once a major exporter to the United States, has the largest petroleum reserves in the world. But the oil industry is so paralyzed that it could take months or even years for the country to substantially ramp up exports.

With Iran, Mr. Biden is trying to revive a 2015 nuclear deal that President Donald J. Trump has pulled out of. A deal could give Iran the freedom to export more than 500,000 barrels of oil a day, easing global supply shortages and making up for some of the barrels Russia is not selling. Iran also has about 100 million barrels in storage, which could potentially be released soon.

But the nuclear talks appear to be mired in disagreements and are not expected to bear fruit anytime soon.

Of course, deals with Venezuela or Iran themselves can become political commitments for Mr. Biden, as most Republicans and even some Democrats resist compromise with those countries’ leaders.

“No president wants to remove Iran’s Revolutionary Guards from the terrorist list,” Ben Cahill, an energy expert at the Center for Strategic and International Studies in Washington, said of one of the sticking points in talks with Iran. “Presidents are wary of any move that looks like they are making political sacrifices and giving victory to America’s adversaries.”

Foreign policy experts say that while energy crises during war are inevitable, they always seem to surprise governments, who are generally unprepared for the next crisis. Mr. Bordoff, Obama’s adviser, suggested that the country invest more in electric cars and trucks and encourage greater efficiency and savings to lower energy demand.

“The history of oil crises shows that when there is a crisis, politicians walk around like chopped-off chickens, trying to figure out what they can do to provide immediate aid to consumers,” said Mr Bordoff. US leaders, he added, need to better prepare the country for “the next time there is an inevitable oil crisis”.