US searchesforways to counter Opec+ move

White House considers laws against cartel and possible talks with pariah countries

The US has promised to respond to the Opec+ decision to slash oil production but President Joe Biden has few meaningfuloptions tolessen theimpactof the historic cuts,analystswarned. Last week’s move by the Opec cartel and allied producers to reduce the group’s daily production target by 2mn barrels has already pushed up oil prices. Biden, who is trying to move the US away from fossil fuels, wants to keep domestic petrol prices down, especially before the midterm elections next month, but must also consider the impactonEuropeofanyaction. Washington could revive anti-cartel legislation against the Saudi-led group and make additional releases from the national strategic petroleum reserve. It could also limit US energy companies’ exports if shortages emerge or loosen sanctions on pariah oil producers such asVenezuelaand Iran. However, Karen Young, senior research fellowatColumbiaUniversity’s Center on Global Energy Policy, said many of these interventions were forms of price manipulation that did not solve longer-term global energy needs. “Allof thesemechanisms are all forms in one way or another of market manipulation,” she said. “It doesn’t focus on whatmight be better for all of us to do— to think about the demand side, how do we really go about reducing demand for oiland gas.” Biden administration officials are also urging US oil producers to increase output, though they have been reluctant to do so amid pressure from Wall Street to return profits to shareholders. TheWhiteHouse saidlastweekitwas considering additional releases from its strategic reserve. Analysts have credited the millions of barrels released so far this year with helping to bring down prices, but say they are a temporary fix that does not help create new production or spur investment, and ultimately the US will have to refill those reserves, potentially at higher prices Brian Deese, director of the National Economic Council, credited previous releases from the reserve as “one of the most significant drivers of blunting oil price increases over the last set of three or fourmonths”. Biden has presided overlarge releases from the SPR and the US is nearing levels it may be unable to go beyond withoutviolatinginternationalagreements. Efforts to pass legislation known as Nopec, which has long been considered by US lawmakers, are also gaining steam. This would allow the US justice department to sue members of the Opec+ cartel for anti-competitive behaviour. US Senate majority leader Chuck Schumer said the administration was looking at Nopec legislation and other bills “to best deal with this appalling and cynical action”, referring to the Opec+ cut. However, penalising oil-producing countries such as Saudi Arabia could also be counter-productive, resulting in a further disruption of supply to Europe at a time when western consumers need more oil notless. Helima Croft, head of commodities strategy at RBC Capital Markets, said the EU embargo on Russian crude that comes into force on December 5 would require Middle Eastern producers to increase supply to fill the shortfall. “When you want to think about the White House perspective, it might feel goodin themoment to talk about Nopec and talk about reducingOpec power, but you are going to need potentially every moleculecomeDecember,”shesaid. In August the US energy department toldUS refiners to build domesticinventories rather than export more, increasing suspicion that the Biden administration could seek to limit or block exports to bring downUS pump prices. However, Europe’s energy crisis would probably be worsened by such a move, as the continent imports fuel from the US and is soon to halt all seaborneRussianoilimports. The US is also engaged in various diplomatic efforts that could result in sanctions being eased against unfriendly oilproducing countries Venezuela and Iran. Talks on reviving the 2015 nuclear deal between six world powers and Iran have largely stalled, but a deal could see Iranian oil return to global markets. “Suddenly the forces are aligned in a differentway,” said Jorge León, a former Opec official now at energy consultants Rystad. “The US has limited options to reduce prices, so maybe there’s an incentive for it to push [for a deal with Iran] as soon as possible to try to counterbalance the cut fromOpec.” Separately, the US has engaged in quiet talks with the government of Nicolás Maduro in Venezuela, which it does not officially recognise, that could allow its oil to return to American and Europeanmarketsif progresswasmade on human rightsand democracy. The recently passed Inflation Reduction Act, which includes measures that will help the US transition away from fossil fuels, will eventually reduce US exposure to global oil prices but will not help address the current problem, analysts said. Young added: “This is meant to be a stimulus for domestic energy needs and it’s not a short-term solution, but it is a more thoughtful way to go about it, trying to help us need oil and gasless and to producewhatwe havemore cleanly and efficiently.”