RE: Biden25 Jan 2022 09:28
There are those who say that Biden is content to see the prices of traditional fossil fuels rise in order to narrow the pricing differential between them and their more costly ‘green’ alternatives. However, underlining how often and how quickly such lofty principles disappear in the cold light of hard political self-interest, the U.S. Land Administration Committee released data at the beginning of 2022 showing that Biden in his first year as president issued 35 percent more permits for drilling oil and gas wells than his predecessor, Donald Trump, in his first year.
Given that there is evidently no ideological reason precluding Biden from acting against rising oil prices, what are the options available to him to do so right now? Some believe that taking the sort of robust approach to OPEC producers through its de facto leader, Saudi Arabia, would prompt a flood of new oil into the market. The regulation of oil prices in an effective band between a US$35-40 pb floor (the breakeven price of U.S. shale producers) and a US$75-80 pb cap (the level above which the prospect of economic damage to the U.S. looms) was a significant achievement of the Trump presidential era. Even for Trump, though, the floor price was easier to manipulate, as it was reached only when Saudi Arabia and OPEC were actively pumping everything they could – most notably during the 2020 Oil Price War - and could easily be reversed by cutting back production to more historically average levels. Forcing Saudi to do this was achieved by Trump directly telephoning Crown Prince Mohammed bin Salman (MbS) on 2 April 2020 and telling him that unless OPEC started cutting oil production he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from Saudi Arabia.
Trump’s administration was successful also in controlling the cap on the price through similar tactics, as evidenced during the only time that oil prices rose and stayed persistently above the US$75 per barrel of Brent level during his presidency – April to October 2019. Trump publically Tweeted about Saudi Arabia’s King Salman that: “He would not last in power for two weeks without the backing of the U.S. military.” Privately, moves were being made to finally push through the ‘No Oil Producing and Exporting Cartels Bill’ (NOPEC), the threat of which also hung over the mooted initial public offering of Saudi Aramco that was vital for MbS’s prestige among senior Saudis at the time. The NOPEC bill, when enacted, would immediately remove the sovereign immunity that exists in U.S. courts for OPEC as a group and for its individual member states. This would leave Saudi Arabia open to being sued under existing U.S. anti-trust legislation, with its total liability being it's estimated US$1 trillion of investments in the U.S. alone, and Saudi Aramco being broken up into constituent parts.
Related: An Expert’s Take On Energy Markets In 2022
So, would either of these tactics work right now for Biden
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