Crude oil prices continue their meteoric rise toward $100 per barrel as analysts predict rising demand, and the U.S. energy sector is hampered by restrictive Biden administration policies.
The West Texas Intermediate (WTI) crude oil index, which measures U.S. prices, increased more than 1.89% to $91.73 per barrel while the European Brent Crude index ticked up nearly 1.71%, hitting $92.94 per barrel as of Friday afternoon. Both indices inched closer to their highest price in multiple years, according to data tracked by Business Insider.
The International Energy Agency (IEA) pointed to the decision earlier this month by the Organization of the Petroleum Exporting Countries and Russia (OPEC+) to stick by its low output plan despite rising demand fueled by the global economic recovery.
“Chronic underperformance by OPEC+ in meeting its output targets and rising geopolitical tensions have propelled oil prices higher,” the IEA said Friday. “Benchmark crude prices rose by more than 15% in January to cross the $90/bbl threshold for the first time in more than seven years.”
Just two years ago, OPEC+ was unable to simply limit output as U.S. producers would ramp up production when oil prices rose which would increase supply and lower prices. That price decrease would force OPEC+ to produce more to keep revenues at the levels they needed to fund domestic programs. With the U.S. unable to compete as a dominant player in the market, the global oil situation resets to a pre-2016 OPEC+ oligopoly.
“Global oil stocks at multi-year lows and dwindling OPEC+ spare capacity have left the market with only a small cushion,” the IEA said.
OPEC+ includes middle-eastern, African, South American oil-producing nations and Russia with the middle-east and Russia dominating production decisions.
Under the previous administration, OPEC+ was forced to respond to Western policy as the United States was the largest energy producer in the world and was a net-energy exporter (energy independent) beginning in 2019. In the past year, the U.S. has seen dwindling exports and increasing imoprts as government overregulation and an unsure policy climate have slowed production increases.
“If the persistent gap between OPEC+ output and its target levels continues, supply tensions will rise, increasing the likelihood of more volatility and upward pressure on prices,” the IEA concluded.
Biden’s solution has been to beg other countries to increase production and to release 50 million barrels from the Strategic Petroleum Reserve (SPR). That release accounted for less than 1/6th of a single-day deficit in the current market and had no effect on supply or pricing.
As crude approaches and crosses the $100 per barrel line, buckle up for some even more expensive gas, groceries and electricity as OPEC+ is now in the driver’s seat … again.
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