by Mitch Kokai
Senior Political Analyst, John Locke Foundation
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. …
… 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.