Biden’s quest to lower fuel prices collides with his climate agenda

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Through Jennifer A. Dlouhy and Ari Natter to 10/10/2021

WASHINGTON (Bloomberg) – President Joe Biden is under increasing pressure to contain rising gasoline and natural gas prices that threaten the economic recovery and Democrats’ political ambitions.

But he has little power to control global energy markets.

“The toolkit is actually quite limited,” said Kevin Book, managing director of research firm ClearView Energy Partners. “The US government does not have the capacity to move earth and molecules faster than private industry which is responsible for power generation.”

Moreover, some options – from tapping the country’s emergency oil stocks to banning natural gas exports – conflict with the president’s green agenda and could anger European allies. Other tactics commonly used to fill supply shortages after natural disasters are of little help in tackling price spikes.

Rising fuel prices pose a political risk to any US president. But Biden added cause for concern, as high energy costs and rising inflation threaten his attempt to foster an economic rebound after the pandemic and pass major legislation on social spending and spending. infrastructure.

White House officials reiterated this week that the administration will use all tools at its disposal to restrict gasoline prices, which are the highest they have been for this time of year since 2014. “We will continue to look for ways to ease the burden of energy costs on American families,” White House spokeswoman Karine Jean-Pierre told reporters aboard Air Force One on Thursday. However, she added: “There is no plan to take action at the moment.”

Exploit emergency stocks

Biden could tap into the country’s emergency reserves of crude and refined petroleum products. It is a proven tactic; Former President Barack Obama withdrew some 30 million barrels of crude due to supply disruptions in Libya a decade ago, and former President Bill Clinton used the same strategy to bring prices down months before the 2000 presidential election.

The Department of Energy is already required by law to sell 260 million barrels of oil in the Strategic Petroleum Reserve by fiscal year 2027. Additional releases could now push prices down slightly, analysts say, although that the effects are temporary.

Consolidate crude exports

Although Congress lifted the ban on most US crude oil exports in 2015, Biden could invoke emergency powers to reinstate the restrictions.

Oil industry allies and analysts warn the move could backfire by inviting other countries to retaliate and harm the oil-producing states represented by Democrats in Congress.

“The export market has been the main driver of investment in the US energy supply, and a deterrent that could actually increase energy prices in the medium term,” said Benjamin Salisbury, research director at Height Capital Markets, in a research note.

Additionally, US oil and gas prices would still be tied to a global market even if the US does not actively export them.

“Oil is a global commodity,” said Frank Macchiarola, vice president of the American Petroleum Institute, an industry trade group. “Limiting energy exports and energy transit will not solve the underlying problems we face today with energy markets. “

Curb LNG shipments

Manufacturers, chemical makers and other businesses that depend on natural gas for heat and power are already pleading with the administration to cut exports as supply issues in Europe drive up prices.

Under the Natural Gas Act, the Biden administration has the power to restrict exports if it determines they are not in the best interest of the nation. And even before European energy issues drew attention to gas exports, environmentalists were pressuring the Energy Ministry to reject new LNG export demands.

But any decision to cut LNG exports as Europe prepares for winter could be seen as the US turning its back on its allies.

“It’s pretty hard to qualify the $ 6 gas as a national emergency,” said Charlie Riedl, executive director of the Center for Liquefied Natural Gas, which represents exporters such as Cheniere Energy Inc. and Sempra Energy. “We produce more gas than we currently use. “

Displacement of energy flows

The president could limit the movement of oil, gas and petroleum products by pipeline, rail, barge or boat by relying on other emergency authorities to coordinate domestic transport created in the wake of the 9/11 terrorist attacks 2001.

The power, which would be wielded by the head of the Transportation Security Administration, could be used to prevent fuels from leaving U.S. ports or to move energy to high-priced areas.

Waiver of the Jones Act, which requires the use of US ships to move goods between US ports, is unlikely to have much impact at this time.

Expanding drilling

The administration could speed up the approval of drilling projects and the sale of leases in the western states, where Biden suspended auctions in January. In response to an order from a federal judge, the Home Office is expected to auction the Gulf of Mexico leases next month, but sales of land land are currently not expected until early next year. .

Leases sold today would not immediately bring in oil. In U.S. waters, it can take five to ten years after a lease is sold for companies to find oil, drill exploration wells, and begin production. Still, a rush for new auctions would have immediate signal value for a market that expects the Biden administration to curtail oil and gas development as part of the president’s efforts to green the U.S. energy system.

While former presidents have responded to high energy prices by seeking to increase oil production, “they were not limited by environmental goals of reducing greenhouse gases,” Book said. “The Biden administration is, and they’re playing with an even smaller toolbox because of it.”

Abandonment of fuel rules

When storms squeeze gasoline supplies, the U.S. government has sometimes allowed refiners and fuel distributors to sell cheaper blends.

Today, the administration is facing pressure to relax the requirements for the blending of biofuels in diesel and gasoline. Experts disagree on the extent to which these requirements of the renewable fuels standard affect gasoline prices, but refiners argue that cuts would bring immediate relief.

“Crude oil costs – largely a product of global supply – are the main driver of gas prices at the pump, but politics makes matters worse,” said the American Association of Fuel and Gas Manufacturers. petrochemicals in a press release sent by email.


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