Washington weighs its options in the aftermath of OPEC’s big oil move

Leaders in Washington have been on their heels since OPEC+ announced deep production cuts. However, what could be in the offing when it comes to additional policy responses have become clearer in recent days.

“There’s a lot of alternatives,” President Biden told reporters on Thursday adding on Friday “I’m not finished with that yet.”

On Wednesday, oil-producing nations — including Russia — announced they would cut production by 2 million barrels per day, saying it was a way to get ahead of a weakening global economy. But many policymakers in the U.S. immediately worried a spike in oil prices could both provide Russia with an influx of oil revenue to continue their war in Ukraine and hurt Democrats’ chances in the coming midterm elections.

On Thursday, Brian Deese, President Biden’s top economic advisor, said that Biden tasked his team to “take nothing off of the table” in response.

“There’s very few levers that the government can actually do [and] if we want to reduce the price of fossil fuels, we need to get more of them out of the ground and the administration really hasn’t been favorable to adopting those policies,” Lipow Oil Associates President Andrew Lipow told Yahoo Finance.

The price of crude oil has indeed spiked in recent days and, as of Friday, is within sight of the important psychological barrier of $100 a barrel.

4 ideas are being considered by the White House

The Biden administration pulled their most direct lever immediately with Wednesday’s announcement that an additional 10 million barrels from the Strategic Petroleum Reserve would be released in November. The Biden administration has been releasing oil from the reserve since March and planned to stop this month before extending the deadline.

However, the reserve currently sits at the lowest level in decades making further releases less likely. In fact, the Department of Energy instead made plans to buy additional oil in the months ahead to replenish the reserve.

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The second approach in play among Biden and his aides is continued criticism of oil companies for not, in their view, lowering retail gas prices enough. “Energy companies need to reduce retail prices to reflect the price that they’re paying for the wholesale gas,” Deese said Thursday, but Friday’s spike in prices makes that less likely.

Biden and his aides reportedly had a tense meeting with oil executives last week and are considering, according to Bloomberg, the controversial idea of a ban on exports of refined petroleum products. Asked about it Wednesday, Deese wouldn’t comment on the idea specifically but also didn’t deny it was being discussed saying “we have all options on the table.”

Lastly, the Biden administration continues to proceed with its push to cap the price of Russian oil. But the idea has run into skepticism about how effective it would be and would only cap the price for Russian oil rather than the price paid by Americans at the pump.

Possible action from Capitol Hill

There are also possible actions when Congress returns in November.

One idea under renewed consideration is a bipartisan bill that has bounced around Congress for years dubbed “NOPEC” which advanced in the Senate earlier this year. The bill would remove sovereign immunity and authorize the Justice Department to bring suits against members of OPEC+ for antitrust violations.

The Biden administration had been cool on the bill but a White House statement Wednesday signaled more openness saying the Administration “will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices.”

A new effort was proposed this week that would mandate the removal of U.S. troops and missile defense systems from Saudi Arabia as well as the United Arab Emirates. In a statement, the lawmakers behind that bill said this week that “[w]e see no reason why American troops and contractors should continue to provide this service to countries that are actively working against us.”

Republicans have largely chosen to focus on a lack of efforts from the Biden administration to spur U.S. oil production. “If there was ever a time for the Biden administration to reverse course and work with our energy producers, instead of against them, it is right now,” Sen. Lisa Murkowski (R-AK) said this week.

On a CNN interview Thursday, Biden’s top energy aide, Amos Hochstein, pushed back on the criticism. “We’ve already seen increases of production of about a half a million barrels a day by the U.S. industry [and] we expect those to go up into 2023,” Hochstein said.

“We’re going to do everything we can to make sure that a small number of countries does not affect the American consumer,” he added.

The Venezuela question

The other key outstanding question is what actions Biden will take with regard to Venezuela. The Wall Street Journal reported Wednesday that the U.S. is looking to ease sanctions on Venezuela to allow Chevron to continue producing there and pump more oil into world markets. The White House has denied the plans with Hochstein saying “we have not made any decisions there.”

This week, President Biden added that Venezuela and its president, Nicholas Maduro, would have to do “a lot” before his administration would consider easing sanctions.

During a Yahoo Finance Live appearance Thursday, Prosper Trading Academy CEO Scott Bauer said even if it were to come to pass “that effect is not going to come quickly either, the state of drilling is in shambles in Venezuela” and it would take 3-6 months before it would have an impact on supply.

Biden also defended his recent trip to Saudi Arabia again — and fist bump with Crown Prince Mohammed bin Salman — claiming it wasn’t about oil but acknowledging that this week’s supply move “is a disappointment, and it says that there are problems.”

It’s likely to be a difficult few months for oil markets in the weeks ahead. “It’s going to be a war here between what the United States and the EU can do [and] what the Saudis and the rest of OPEC can do trying to protect their market by really cutting production,” Energy Word Founder Dan Dicker said this week.

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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