Biden's 'Unimaginable' Options for Punishing OPEC: Politico

US President Joe Biden and other Democrats are considering a range of actions to mitigate the impact of OPEC's decision to cut oil supplies, although none of their options seem appealing, according to Politico. OPEC's move to reduce production by 2 million barrels per day threatens to raise gasoline prices in the US, undermining Biden's precarious diplomatic relations with Saudi Arabia established in July and boasting that he helped reduce prices.

Now the White House and congressional leaders are discussing a variety of measures to protect American consumers, including attempts to strip OPEC of market control, limiting exports of energy resources from American companies, and easing sanctions against unfriendly oil-producing countries, each of which carries serious consequences.

So far, the White House has pledged to work with Congress on legislation that would allow the US to sue oil cartels for antitrust violations. Other options on the table range from ineffective to disastrous, market analysts say. Their unanimous opinion is that the policy that will actually reduce gasoline prices will require long-term planning, so the best thing lawmakers can do for energy markets right now is to restrain them.

In the near future, oil prices will likely remain below $90 a barrel, unlike the $122 seen in June. Additionally, gasoline prices, while high as of Friday at an average of $3.891 per gallon, do not seem to provoke the widespread outrage among voters that was seen earlier this summer.

Some analysts believe Biden's cool-headedness regarding OPEC will serve him better. 'In the absence of good measures, I think it’s better to say less,' noted Rachel Ziemba, a senior fellow at the New American Security think tank. In her view, Democrats should focus on everything they have done to reduce US dependence on oil, primarily through last year’s bipartisan infrastructure bill and the Inflation Reduction Act signed by Biden this year.

Before the OPEC+ meeting, 'many were sounding alarms' about how dramatic the oil cuts would be, Ziemba said. The White House has promised to 'consult with Congress about additional tools and authorities to reduce OPEC's control over energy prices,' clearly referencing legislation that bipartisan lawmakers have frequently proposed in recent years.

This so-called NOPEC would modify antitrust laws to allow the Department of Justice to sue countries that restrict the trade of oil, natural gas, or any petroleum products. The bill passed the Senate Judiciary Committee in May on a bipartisan basis.

However, it remains unclear whether Republicans will be willing to assist Democrats in addressing the OPEC issue when the Republican Party is criticizing Biden’s policies for driving up fuel prices by limiting oil and gas leasing on federal lands. Some Republicans derided Biden for his promise to consult Congress about OPEC’s response, stating that Democrats should demonstrate a willingness to increase drilling at home.
'If their advice doesn't include opening up domestic production to some level, then it's just talk,' said Den Cansman, the chief Republican on the energy and natural resources committee, referring to Wyoming Senator John Barrasso’s staff.

Litigating against OPEC members would raise the stakes in the US-OPEC confrontation, which could instill fear in oil markets. Analysts believe that this may not necessarily lead to lower prices at gas stations. The Department of Energy has been arguing for months with oil companies about the idea of temporarily restricting US fuel exports, which currently stand at about 4 million barrels per day. The Department notes that fuel is better used to replenish US regional reserves, which are low compared to the average seasonal numbers.

Senior advisor Amos Hochstein at the Secretary of Energy’s office is contemplating this option. The US oil refining industry is operating at reduced capacity as old plants that ran at full capacity for months have been plagued by production disruptions, and some have had to undergo servicing. While demand remains steady, nearly every drop of fuel is going to consumers, including those living in allied nations. The disappearance of that fuel from the global market will almost inevitably lead to price rises and frustrate Europe, where much of the American diesel fuel is exported.

The US has crude oil reserves, and Biden has extracted over 170 million barrels this year. However, the country lacks reserves for gasoline or diesel fuel. The issue with this idea is that gasoline has a much shorter shelf life than oil. This means that any reserves will require constant changes in fuel to ensure everything is fresh. Additionally, consideration must be given to the different grades of gasoline sold in different regions.

Perhaps the politically riskiest move of all is also to reduce oil prices. Lifting economic sanctions that block Venezuelan and Iranian oil exports would increase supply in the market and ease supply pressures, experts say. The administration has been making efforts to negotiate with these regimes, especially as domestic fuel prices have risen. However, time is needed to arrive at any politically and diplomatically viable agreement.

'I think there is now a clear incentive to ease sanctions against several oil producers, such as Venezuela,' said Christophe Barron, chief economist at Market Securities Global Investment Research. 'The issue of the nuclear deal with Iran will be back on the table. Thus, new preliminary negotiations will likely be scheduled in the coming weeks,' he added.

Particularly angry Democrats have threatened to step outside traditional energy limits. Representative Tom Malinowski has introduced legislation that would remove American troops and defensive systems from Saudi Arabia. However, this would have negative repercussions as this move would start a strategic shift in the existing US security apparatus in the region.

'We need clear actions against Saudi Arabia. I’m open to proposals from the administration that could weaken OPEC. But we need more than that. We’ve done so much for the Saudis, and they are failing to help in the energy crisis. This is absurd and truly insulting to the American people,' Congressman Ro Khanna said in an interview.