The United States won’t intervene to boost oil prices as crude continues its downward slide, the State Department’s top energy diplomat said Monday in Abu Dhabi.
“When people ask the question ‘what will the U.S. do?,’ it’s really the market that’s going to have to decide what happens,” said Amos Hochstein, special envoy and coordinator for international affairs at the State Department’s Bureau of Energy Resources, according to Bloomberg.
“This is about a global market that is addressing the supply-demand curve,” he said.
Oil prices have more than halved since July, when crude cost more than $100 per barrel. West Texas Intermediate crude, a U.S. benchmark, was fetching $48.69 per barrel as trading opened Tuesday. Brent, an international index, opened at $48.84 per barrel.
That’s been a boon for U.S. consumers, as it’s translated into lower gas prices that have acted as a mini-stimulus. But it’s taken the steam out of states that have relied on the domestic oil and gas boom to drive their economies, as U.S. drillers in high-cost shale energy regions have found it difficult to turn a profit at current prices except in the most lucrative of areas such as in Texas and North Dakota.
The price trend is a reflection of multiple factors. Surging U.S. production led by hydraulic fracturing — or fracking — has turned the nation into the world’s second-largest oil producer behind Saudi Arabia. At the same time, the Saudi Arabia-led Organization of Petroleum Exporting Countries has kept production churning, leading to a global oversupply amidst weaker than expected demand.
While OPEC has acted as a “swing producer” throughout much of its history — meaning when prices fall, it can curtail production to kick them higher — the U.S. isn’t considered to have that same type of influence on the market, not least because its oil production is privately controlled compared with state-run industries in Saudi Arabia, Venezuela, Russia and elsewhere.
When asked what the U.S. could do to influence prices, Hochstein said, “We do have mechanisms to work with our partners around the world if something extreme happens, but that’s not where I think we are and I think the markets so far can adjust themselves.”
