Gasoline prices are skyrocketing. OPEC and Russia are not coming to the rescue

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Energy ministers from major oil and gas producers, including Saudi Arabia and Russia, decided in a virtual meeting on Thursday to stick to their plan to step up production. The coalition said in a statement that it would only increase production by 400,000 barrels per day in December.

Even as the world debates the end of fossil fuels at COP26 in Glasgow, OPEC and its partners have faced calls from major energy consumers, including the United States, Japan and India, to turn on the taps wider to help lower prices.

Speaking at the climate summit on Tuesday, Biden said the rise in gasoline prices is “a consequence” of “Russia’s or OPEC countries’ refusal to pump more oil.”

“Our view is that the global recovery should not be jeopardized by a mismatch between supply and demand. OPEC + does not appear willing to use the capacity and power it currently has at this critical time. of global recovery for countries around the world, ”a spokesperson for the National Security Council said in a statement. “The time has come for major producing countries to stabilize energy prices and ensure that high prices do not hamper the current global economic recovery.”

The price of Brent crude oil, the global benchmark, has doubled in the past year to reach 83 $ per barrel as the global economy recovers from its pandemic crisis. Bank of America predicts that prices will rise further to reach $ 120 per barrel by June 2022.

OPEC members produce around 40% of the world’s crude oil. OPEC has coordinated production decisions in recent years with other major suppliers, including Russia, as part of a larger group called OPEC +. He added in supplies that were cut during the pandemic when demand collapsed, but in a very gradual way with the aim of meeting the increase in consumption without triggering sharp price cuts.

“As far as the United States is concerned, yes, we have had discussions at all levels and we still believe that we are doing the right job and the most practical job,” the Saudi Minister of Energy said Thursday, Prince Abdulaziz bin Salman.

But consumers may not see relief for a while.

“Prices over $ 80 a barrel are, of course, [one] This is why OPEC + will not be in a hurry to add supply to the market, especially since American producers have shown little willingness to increase their production, ”said Caroline Bain, chief economist of commodities at Capital Economics, following Thursday’s decision.

Soaring oil prices are slowing economic recovery at a crucial time, and high gasoline prices could have political ramifications for Democrats heading into next year’s midterm elections. Gas prices in the United States have reached a seven-year high of $ 3.40 per gallon nationally and are flirting with $ 4 in Nevada, Washington and Oregon. Gasoline and diesel prices have reached record highs in part of Europe and in the UK as well.

Natural gas prices are also skyrocketing, hurting low-income households around the world as they turn on their heat in the onset of winter in the northern hemisphere.

“The external flex on OPEC + from oil-producing countries is intensifying, particularly from the United States, and has led to speculation that if the alliance itself does not add supply to the market, the United States, possibly in coordination with other states, be forced to stifle rising oil prices by releasing crude from strategic reserves, ”said Louise Dickson, analyst at Rystad Energy.

Last month, Energy Secretary Jennifer Granholm suggested that the exploitation of the United States Strategic Petroleum Reserve was under consideration – before the Department of Energy later reverted to its comments in clarifying that there was no “immediate plan” to do so.

Biden’s call for OPEC + countries to increase production coincides with US attempts at COP26 to accelerate the move away from fossil fuels in order to avert a climate catastrophe. The International Energy Agency has said the development of new oil and gas fields must stop if the world is to limit warming to 1.5 degrees Celsius and avoid the worst effects of the climate crisis.

In an announcement at COP26, seven countries and 21 other parties, including banks and cities, pledged to end the use of coal. Ukraine, Chile, Singapore, Mauritius, Azerbaijan, Slovenia and Estonia have joined the Powering Past Coal Alliance, which requires members to stop building new coal projects and phase out coal from ‘by 2030 for developed countries and 2040 for developing countries.

And 20 countries, including the United States, Canada and the United Kingdom, have agreed to end funding for fossil fuel projects abroad. Several countries had already agreed to end international coal funding, but the agreement is the first of its kind to also include oil and gas projects.

“On the surface it seems like an irony, but the truth is… the idea that we’re going to be able to switch to renewables overnight and… from that point on, no longer using oil or not using gas or not using hydrogen just isn’t rational, ”Biden told reporters on Sunday.

– Matt Egan, Chris Liakos and Kevin Liptak contributed reporting.


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