OPEC’s October Oil Surprise – WSJ

Analysts estimate this would lift crude prices to about $100 a barrel from the $80 to $90 range of the last month. OPEC countries may be seeking to boost their budgets to cope with rising food prices and the strong dollar. But the timing couldn’t be worse for Mr. Biden and Democrats in Congress.

The Administration has released 200 million barrels or so from the Strategic Petroleum Reserve over the past year and about one million barrels a day in recent months. These drawdowns were scheduled to end this month, but the Administration recently extended the releases into November, no doubt worried that a taper would increase gasoline prices before the midterm election.

But oil traders aren’t naifs. They know the releases will soon end and the Administration will also have to start refilling the reserve, which is at its lowest level since 1984. Much of the oil that remains can’t be efficiently processed by U.S. refiners. So if there were a true national emergency—say, a cyber attack on a major oil pipeline—the U.S. might not have enough inventory to keep supply flowing.

To refill the reserve, the Administration may soon have to buy oil at a higher price than it has been selling it. Sell high and buy higher wasn’t supposed to be the strategy, Mr. President. A smarter strategy to reduce U.S. energy prices would have been to encourage more domestic production.

A new study by the Committee to Unleash Prosperity estimates that the U.S. would be producing between two and three million more barrels of oil a day and between 20 and 25 more billion cubic feet of natural gas if the Trump Administration’s policies had continued. Economists

Casey Mulligan

and

Steve Moore

say the Biden Administration’s anti-oil-and-gas policies are costing the U.S. economy $100 billion a year.

Producers normally respond to rising prices by raising output. That was true in the past in the U.S., especially from 2016 to 2019 when production increased by about three million barrels a day. But U.S. producers haven’t responded to higher prices during the Biden Presidency as much as those in other countries, including Russia, Canada and Norway.

Pioneer Natural Resources

CEO

Scott Sheffield

last month estimated that U.S. oil production will likely grow by a mere half a million barrels a day this year and perhaps even less in 2023. So even though oil prices have been about 50% higher under

Joe Biden

than under

Donald Trump,

production growth is about 50% lower.

Democrats blame oil drillers for prioritizing profits over production, but companies must consider the long-term return on investment. The Biden policies have created substantial regulatory uncertainty, raised production costs, and directed capital to green energy.

If gasoline prices rise before the November election, the Administration has its own policies to blame.