Rebuffing President Biden’s past hat-in-hand requests for the region to boost production, the 23-member OPEC+ announced this week their intention to slash output by 2 million barrels of oil a day.
The move immediately drew the ire of the Biden administration, who is all too aware of what a drastic cut to the global oil supply could do to domestic gas prices just weeks out from a midterm election.
Gas prices have already been rising again after falling considerably from their June peak, adding to economic pain experienced by millions of Americans, and presenting a serious political liability for Democrats heading into November.
In response, the Wall Street Journal has reported that the Biden Administration intends to explore the possibility of easing sanctions on the authoritarian Maduro regime in Venezuala to allow Chevron to boost oil production.
The Biden administration is preparing to scale down sanctions on Venezuela’s authoritarian regime to allow Chevron Corp. to resume pumping oil there, paving the way for a potential reopening of U.S. and European markets to oil exports from Venezuela, according to people familiar with the proposal.
In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country’s opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said.
The U.S., Venezuela’s government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country’s battered electricity grid and municipal water systems.
That’s right. After being snubbed by the Saudi crown prince, Biden would rather risk enriching an authoritarian socialist regime in Venezuala than send definitive market signals to American oil and gas operators to boost long term supply.
Despite being the world’s number one producer of both oil and gas, American firms have been highly conservative in the face of elevated prices due to uncertainty over long-term support for their operations.
A new U.S. Energy Information Agency report finds the lowest number of drilled but uncompleted wells (DUCs) in all major production regions since 2013.
As the EIA points out, a decline in DUCs in most major U.S. onshore oil and natural gas producing regions indicates that producers are concentrating on completing existing wells rather than investing in drilling new wells to boost supply.
And it’s certainly hard to blame them for exercising capital discipline for the time being. President Biden ran for office on a platform of all but destroying the industry. Despite a resurgence in support for fossil fuel production around the globe, the administration has not rethought its antagonistic relationship with the industry through the cancellation of leases, leveling accusations of “price gouging”, and entertaining hardline environmental activists who would see the industry bankrupted.
So instead we end up in a situation where the world’s largest and cleanest producer of fossil fuels is left unable and unwilling to respond to a dearth of global fuel supplies. Meanwhile, our political leadership remains supine in the face of OPEC+ and the Venezualan regime.
It’s the natural result of a complete unwillingness to support the domestic fossil fuel industry. Policies have consequences.
Apropos of nothing… https://t.co/ofK7rQwqVj
— Jake Fogleman (@Jake_Fogleman) October 5, 2022