Biden team asks oil industry for help to tame gas prices
The White House has been consulting with the oil industry to seek a remedy for rising gasoline prices as surging inflation threatens to tarnish the economic recovery, according to three people familiar with the discussions.
The latest outreach to the oil industry is an awkward shift for the Biden administration, which has pledged to move the country away from fossil fuels and has drawn criticism from the industry and Republicans for pausing lease sales of federal land for oil and gas development.
But President Joe Biden faces mounting political pressure to curb rising prices that have lifted the average per gallon price of gasoline to $3.28, more than $1 above the year-ago level, as crude oil prices hit 7-year highs this week above $80 a barrel. That pain at the pump comes as the U.S. consumer price index jumped 5.4 percent in September, matching a 13-year high and driven partly by troubled supply chains — creating another political headache for Biden heading into the 2022 election season.
Much of the rise in energy costs is beyond the White House’s control and has been attributed to rebounding demand as the economy snaps back from the pandemic as well as an uptick in China’s energy consumption, market analysts said. U.S. oil production has also slipped compared to record output before the pandemic, and oil companies that were hit hard by the plunging demand then have been slow to drill new wells. The OPEC oil cartel is also being careful about opening its spigots too loosely after oil prices tumbled during the pandemic.
The Biden administration has requested OPEC increase its exports, but has few other options for bringing prices down. Energy Secretary Jennifer Granholm said last week that the administration was considering releasing oil from the Strategic Petroleum Reserve, a move that is usually reserved for supply disruptions.
Oil industry officials and experts said the White House team had experience in renewable energy markets, but relatively few people with detailed knowledge of oil markets — the problem of the moment.
“Senior staff is preoccupied with trying to identify options to bring down oil prices, which they believe are driving [the] inflation uptick,” said Stephen Brown, a longtime energy lobbyist and current strategist with RBJ Strategies. “Some producers will talk to them, but it is also not like they have a lot of friends in this sector.”
One lobbying source described a Tuesday night meeting of White House officials focused on rising oil and gasoline prices. A White House spokesman declined to comment on the meeting or outreach to the oil industry. One other person said the meeting included senior staff and did not necessarily involve Cabinet members.
The White House is rushing to show it’s trying to tame high inflation, which has already prompted the Federal Reserve to signal it will reduce its pace of bond purchases that are designed to keep longer-term interest rates low. Biden and his team are targeting bottlenecks in the supply chain that have strained inventories and contributed to higher prices. On Wednesday, he announced the Port of Los Angeles would begin operating 24 hours a day and that major companies including UPS and FedEx would also extend their working hours.
“I want to be clear, this is across the board commitment to going to 24/7,” he said in remarks from the White House. “This is a big first step in speeding up the movement of materials and goods through our supply chain. But now we need the rest of the private sector chain to step up as well.“
Some in the oil industry are using the rise in fuel prices to push back against the Democratic promises to raise costs for oil and gas drilling on public lands.
“To ensure we have a stable and affordable supply of energy here in the United States, the Biden Administration should support the domestic production of oil and natural gas, ensure the continued production on federal land, work with the industry on sensible and smart methane regulations, and stop calling for higher taxes on the American oil and gas industry,” Anne Bradbury, chief executive of trade association American Exploration and Production Council, said in a statement.
Biden came into office promising to accelerate the adoption of electric vehicles and renewables such as solar and wind power. But the White House has made overtures to the oil and gas industry, such as White House climate adviser Gina McCarthy’s meeting with members of the American Petroleum Institute. And despite the pause in oil and gas lease sales, the Interior Department has outpaced the Trump administration in approving new permits to drill on public land.
Still, the industry is smarting over the administration’s call for OPEC to increase oil production, saying it sounded hypocritical given its stance on the auctions for new parcels of public land to drill. Industry officials also complain they have not received nearly the amount of attention they enjoyed under President Donald Trump or even President Barack Obama.
Amid the pandemic-related global supply chain problems, extreme weather events and China’s strong demand for oil and natural gas, administration officials have been leaning more frequently on the industry for advice, sources said.
A person at one oil company active in offshore drilling said the administration had reached out to them last month wanting specifically to know how to keep gasoline production on track after Hurricane Ida forced companies to shut in oil production in the Gulf of Mexico.
Despite the overtures, the federal government has few levers to pull to ward off higher oil prices, market analysts said. Companies have to rehire the truck drivers and other employees they let go when fuel demand cratered last year as the pandemic kept people at home.
Andrew Lipow, head of Houston-based oil market consulting firm Lipow Oil Associates, said the increase in pump prices is a direct result of oil companies finally heeding investors’ calls to slow production and tighten their spending. Investors had fled the sector in the years leading into the pandemic as companies racked up debt to produce an ever-increasing number of barrels.
“Years ago they drilled like crazy and made no money,” Lipow said. “This time around they need to show returns to inventors and they’re increasing their dividends” instead of sending more rigs to the oil fields.
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