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White House huddles with oil industry as gas prices soar

Much of the increase in energy costs is beyond the control of the White House and has been attributed to the rebound in demand as the economy recovers from the pandemic as well as increased consumption of energy. energy from China, market analysts said. U.S. oil production has also fallen from pre-pandemic record production, and oil companies that have been hit hard by falling demand have then been slow to drill new wells. The OPEC oil cartel is also being careful not to open its taps too far after oil prices fell during the pandemic.

The Biden administration has asked OPEC to increase its exports, but has few other options to lower prices. Energy Secretary Jennifer Granholm said last week that the administration was considering releasing oil from the Strategic Oil Reserve, a move usually reserved for supply disruptions.

Officials and oil industry experts said the White House team had experience in renewable energy markets, but relatively few people with detailed knowledge of oil markets – the problem at the moment.

“Senior executives are concerned about trying to identify options to bring down oil prices, which they believe is driving the [the] rising inflation, ”said Stephen Brown, longtime energy lobbyist and current strategist at RBJ Strategies. “Some producers will talk to them, but it’s not like they have a lot of friends in the business either.”

A lobbying source described a Tuesday night meeting of White House officials focused on rising oil and gasoline prices. A White House spokesperson declined to comment on the meeting or the oil industry outreach. Someone else said the meeting included senior officials and did not necessarily involve members of the Cabinet.

The White House is quick to show that it is trying to keep high inflation under control, which has already prompted the Federal Reserve to signal that it will reduce its pace of buying bonds designed to keep interest rates in the long run. low term. Biden and his team are targeting supply chain bottlenecks that have strained inventory and contributed to the rise in prices. On Wednesday, he announced that the Port of Los Angeles would start operating 24 hours a day and that major companies, including UPS and FedEx, would also be extending their working hours.

“I want to be clear, this is a general commitment to go 24/7,” he said in remarks from the White House. “This is a big first step in accelerating the movement of materials and goods through our supply chain. But now we need the rest of the private sector chain to step up as well.

Some in the oil industry are using rising fuel prices to push back on Democratic promises to increase the costs of drilling for oil and gas on public lands.

“To ensure that we have a stable and affordable supply of energy here in the United States, the Biden administration should support domestic production of oil and natural gas, ensure continued production on federal lands, work with the industry on smart and smart methane regulations. , and stop calling for tax increases on the US oil and gas industry, ”Anne Bradbury, chief executive of the American Exploration and Production Council trade association, said in a statement.

Biden took office promising to accelerate the adoption of electric vehicles and renewables such as solar and wind power. But the White House has made overtures to the oil and gas industry, such as White House climate adviser Gina McCarthy meeting with members of the American Petroleum Institute. And despite the pause in oil and gas lease sales, the Home Office has moved ahead of the Trump administration in approving new permits to drill on public land.

Still, the industry is worried about the administration’s call for OPEC to increase oil production, saying it seemed hypocritical given its stance on auctions for new plots of public land to be drilled. Industry officials also complain that they haven’t received as much attention they received under President Donald Trump or even President Barack Obama.

Amid global supply chain issues related to the pandemic, extreme weather events and the High demand for oil and natural gas, administration officials have more frequently relied on the industry for advice, sources said.

A person from an oil company active in offshore drilling said the administration contacted her last month to specifically find out how to keep gasoline production on track after Hurricane Ida forced companies to stop oil production in the Gulf of Mexico.

Despite the openings, the federal government has few leverage to stop oil prices from rising, market analysts have said. Companies must rehire truck drivers and other workers they laid off when demand for fuel crunched last year as the pandemic kept people at home.

Andrew Lipow, director of Houston-based oil market consultancy Lipow Oil Associates, said the increase in prices at the pump is a direct result of oil companies finally heeding investor calls. to slow down production and tighten spending. Investors had fled the industry in the years leading up to the pandemic as companies took on debt to produce ever-growing barrels.

“Years ago they drilled like crazy and didn’t make any money,” Lipow said. “This time around, they have to show inventors returns and they increase their dividends” instead of sending more rigs to the oilfields.

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