The White House is calling on OPEC and its allies to boost oil production in a bid to keep prices down as inflation mounts and energy markets spasm under the uncertainty of the Delta variant.
In July, OPEC+ agreed to gradually ramp up oil production by 400,000 barrels per day (BPD), month by month through August 2022. Administration officials argued on Wednesday that OPEC+'s current pace of production is "simply not enough" at a "critical moment in the global recovery."
OPEC+ targets will "not fully offset previous pandemic production cuts," said National Security Advisor Jake Sullivan in a statement Wednesday. "We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices," he added.
However, OPEC delegates resisted the Administration's overtures, contending that they saw no need to boost production. Some Saudi representatives expressed confusion about the Administration's priorities. "Isn't [Biden] about climate change and the impact on oil on the environment?" remarked one Saudi official. "How come now they are asking for more?"
As more drivers take to the road and sky, fuel prices are soaring, while rising inflation complicates the picture. Consumer prices have seen back-to-back spikes, rising by 5.4% in June and July, while gas prices have followed suit, rising by 2.5% and 2.4% in June and July, respectively.
However, as a total share of a consumer's wallet, energy and gasoline costs stand at a sixty-year low. Nevertheless, prices are "high enough to create a pinch on working families," said President Joe Biden in remarks on Wednesday.
"The president recognizes that gas prices can put a pinch on the family budget," an unnamed senior White House official reiterated to CNBC. "He'd like his administration to use whatever tools that it has to help address the cost of gas, to help bring those prices down."
The matter is complicated as oil producers are still trying to find their footing post-pandemic. Last year, West Texas Intermediate crude oil futures, a key metric for U.S. oil production, turned negative for the first time. Shortly afterward, OPEC and company slashed daily output by 10 million barrels.
At the time of this writing, Brent Crude, another critical oil benchmark is up 39% year to date. As oil prices recover, OPEC+ is gradually bringing more capacity online with plans to slowly boost production by 6 million BPD over the next few years.
However, OPEC+ targets might not be enough to fill the gulf left by U.S. oil producers, who shut down thousands of wells during the energy downturn last spring.
Despite rising demand, U.S. oil output still hasn't recovered. In May, the Energy Information Agency reported that U.S. producers generated 11.2 million BPD, versus the record 13 million BPD produced prior to the pandemic.