A day that was already the worst in Biden long political career, just got worse when moments ago Reuters reported that just days after the US president showed just how dependent on foreign oil the formerly energy independent US has become, when on Aug 11 he begged OPEC+ to pump more in order to lower the price of gas at the pump, OPEC+ responded that it sees no need to release more oil into the market at present, despite US calls. As a reminder, OPEC+ is currently planning to raise output by 400k BPD a month beginning in August until all the current reductions of 5.8mln BPD are removed, and will not accelerate its schedule despite Biden’s pleading.
In response oil, which had tumbled today after the latest dismal Chinese economic data, managed to modest rebound as OPEC+ clearly refuses to cooperate with the Biden admin.
Commenting on Biden’s surprise weakness, over the weekend Rabobank’s Ryan Fitzmaurice wrote that in addition to angering North American oil producers, the plea for more OPEC+ oil is also not sitting well with the “green” energy enthusiasts that make up a meaningful percentage of Biden’s base. This outrage should come as no surprise as increased oil production undermines the push to decarbonize economies and reduces the incentive to shift away from fossil fuels and towards electric vehicles, a key part of the current administration’s agenda.
Perhaps more importantly though, the plea to OPEC+ to lower US gasoline prices shines a bright light on the cost of going “green” which can be quite expensive it turns out (as discussed here back in June in “Why One Bank Thinks ESG Could Trigger Hyperinflation“). After all, the cost of crude oil makes up a shrinking portion of retail prices at the pump in states such as California, the US leader when it comes to decarbonisation and “green” policies.