The Biden administration remains confident that domestic gas prices will continue to fall through the end of the year, despite recent production cuts from OPEC+ and even more potentially on the horizon.
These cuts effectively wipe out the modest production increases OPEC+ announced following President Joe Biden’s trip to the Middle East this past summer. Global oil prices had steadily decreased since that time, resulting in domestic gas prices falling more than $1.25 on average across that same time.
OIL AND GAS RIG COUNT FALLS DESPITE HIGH GLOBAL DEMAND
Biden and his top administration officials have celebrated the summer gas price slide as evidence the Russia sanctions were working and the country was turning the corner on inflation.
“We know that Americans are feeling the pain of higher costs, higher prices. That’s why we have worked so hard to bring down gas prices. We’ve seen, for 76 days, gas prices have gone down. It is the fastest decline, as you’ve heard us say, in over a decade, and so that is important,” White House press secretary Karine Jean-Pierre told reporters in a recent briefing. “It’s important for the president, but he’s going to continue to do the work.”
“We are seeing some signs that inflation may be — may be, I’m not going to overpromise you — may be beginning to ease,” Biden added last week. “Couple that with the fact that gas prices have now fallen 80 straight days — the fastest decline in over a decade — and the price at the pump is now $1.20 a gallon less than it was the beginning of summer.”
The White House declined to comment on how OPEC’s announcement would affect global oil output, yet multiple senior administration officials told the Washington Examiner that the decreases drivers are seeing at the pump will not reverse.
Officials note that U.S. oil production has increased by roughly half a million barrels per day since the outbreak of war in Ukraine. That number is expected to increase an additional half a million barrels per day by the end of the year and continue growing throughout 2023.
“Since the start of the war, President Biden has worked tirelessly to protect American drivers and ensure that oil companies do their part to lower gas prices,” one senior administration official claimed.
“The president has been clear that energy supply should meet demand to support economic growth and lower prices for American consumers and consumers around the world,” Jean-Pierre said in a statement responding to the cuts on Monday. “The president has taken action — including the historic release of oil from U.S. and global strategic reserves and working with allies on a price cap on Russian oil to ensure we maintain a global supply of oil, even as we punish Putin for his action.”
“Americans have seen gas prices come down every day this summer — 12 consecutive weeks of price declines at the pump and the fastest decline in over a decade,” she continued. “President Biden is determined to continue to take every step necessary to shore up energy supplies and lower energy prices.”
The OPEC cuts come just days after the finance ministers of the G-7 announced that the United States and allies are weighing additional price caps on the sale of Russian oil. Previous action targeted against the Russian oil industry had failed over the summer to undercut Russia’s economy and ability to wage war in Ukraine.
OPEC+ announced Monday’s cuts in an effort to shore up steadily declining global prices, yet crude continued to fall Wednesday. Brent crude dropped 4.6% to below $88.50 per barrel. West Texas Intermediate also fell 5.2% to $82.37 per barrel, a new low for the year.
Experts say that the relative strength of the dollar and recession fears are driving down prices.
“The spectre of a demand-sapping recession across the Western world is closer to becoming reality as soaring inflation and rising interest rates dents consumption,” PVM Oil Associates’ Stephen Brennock explained. “Simply put, the cut is being inferred by market players as a clear sign of the deteriorating demand outlook.”
Meanwhile, Russian Energy Minister Nikolai Shulginov says the country plans to offset the G-7 price caps by increasing gas sales to Asia.
“Any actions to impose a price cap will lead to deficit on (the G-7 countries’) own markets and will increase price volatility,” he said at the Eastern Economic Forum on Tuesday.
Russian President Vladimir Putin took that a step further Wednesday, claiming it would totally cut off energy sales to countries implementing caps.
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“Well, we simply will not comply with them, and we will not supply anything at all if it is contrary to our interests — in this case, economic ones,” Putin told reporters. “Neither gas, nor oil, nor coal, nor heating oil — we will not supply anything.”
