National
Review Online
Tuesday,
September 12, 2023
After falling
below $70 in late June, the oil price (WTI crude) moved up steadily until the
second week of August, when it reached $84 or so. It then slipped back to just
below $80 before resuming its climb later in the month. It now stands at around
$87, compared with an average of just under $82 in September 2022, an
unhelpful comparison for the Biden administration, which is keen to demonstrate
that inflation is falling. The average gas
price at the
pump is also up over its price level a year ago.
The
increase in the oil price gained additional momentum after the decision last
Tuesday by Saudi Arabia and Russia to prolong their production cuts (of 1
million and 300,000 barrels a day, respectively) for another three months, more
than expected in the market. While there is unease about what China’s economic
woes might mean, demand for oil has been strong, and it’s thought that the
Saudis would like to see a price (Brent crude) of around $100. (Brent is
currently trading at about $4.50 above WTI.) That the Saudis
and the Russians chose again to act in coordination is, after the recent
expansion of
the BRICS bloc, another reminder that, diplomatically, things are not going as
well as they might for the U.S.
Meanwhile
Goldman Sachs is warning that its oil-price forecasts
for this year and the next may now be too conservative. The case for this is
further strengthened by the administration’s
decision, citing
“multiple legal deficiencies,” to cancel the seven remaining oil and gas leases
in the Arctic authorized in the last days of the Trump administration. In
addition, regulations will be proposed “ensuring maximum protection” for 13
million acres in the oil-rich National Petroleum Reserve in Alaska, including
an outright prohibition on any new leasing in 10.6 million acres. This will
include 2.8 million acres in the Beaufort Sea, meaning that the entire United
States Arctic Ocean is off limits to new oil and gas leasing. According to the
Department of the Interior, these “bold actions” build on the president’s
“historic conservation and climate agenda.”
Whatever
else might be said about these moves (which will not affect the
600-million-barrel ConocoPhillips “Willow” project in the Reserve approved in
March), it was certainly “bold” (“careless” would be a better word) to announce
them on the day after the Saudis and Russians made their announcements. By
giving another clear indication of where the administration’s priorities lie,
it could well have added to the upward pressure on the oil price that followed
the news from Moscow and Riyadh.
We will
wait to hear more about the alleged “legal deficiencies” affecting the seven
leases, but, for now, the leases’ cancellation can only reinforce the
impression that this administration not only holds oil companies in disdain but
is also an unreliable business partner. That is not the way to encourage
companies to invest in oil production in the U.S., particularly on public
lands, and much as the administration’s climate warriors may dislike it, such
investments are still necessary to help maintain this country’s increasingly
frayed energy security.
In the
meantime, some caribous may have a reason to celebrate the president’s move, as
will Vladimir Putin and Mohammed bin Salman Al Saud. Americans at the
gas pump, not so much.
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