U.S. Requests OPEC to Boost Oil Output

By Scott Huntington

Gas prices are on the rise. In fact, since crude dropped to decade lows in the summer of 2016 — following decade highs in 2014 — prices have steadily risen across America. Experts have credited this price rise to international oil exporters, and the Organization of the Petroleum Exporting Countries (OPEC) in particular.

Since the low prices of 2016, the countries within OPEC have agreed to cap global oil output in an attempt to drive prices higher internationally and dry out the flooded market. The cap on production has resulted in a steady rise in prices, landing us at a present three-year high that has many worried about the future of gas prices. In an official request to OPEC, the White House requested that OPEC release more of its oil product into the market in hopes it will help lower international and domestic prices.

The Politics

President Trump is no stranger to jostling with OPEC. The organization has occasionally furnished the target for the president’s late-night and early-morning tweetstorms, along with claims of shipping vessels loaded with crude oil and warehouses brimming with the black gold, all held on reserve to artificially boost prices. The president himself has promised to help lower the price at the pump, and the request comes less than a month after the president last tweeted on the subject.

The request — that OPEC releases an additional 1 million barrels of crude oil a day — was brought up in a meeting by several prominent OPEC representatives over the weekend. The benefits of this move — potentially more international oil sales — are balanced against the obvious benefits of a higher price. A noncommittal statement was released following the meeting, pledging “stable oil supplies [will be] made available in a timely manner to meet growing demand and offset declines in some parts of the world."

However, international prices might be headed even higher, given the economic sanctions recently imposed on Iran’s oil exports. The sanctions — which coincidentally displaced about 1 million barrels of oil a day — may have some correspondence with the request for further market saturation. These sanctions, coming on the heels of an annihilated Venezuelan economy, paint a bleak picture for the future of oil prices. The economic collapse of Venezuela, one of the primary North American oil tycoons, helped drive prices higher than expected by the OPEC nations.

Domestic Oil Production

Some have predicted that the future of American oil consumption may be in domestic production, particularly in oil-rich areas of Appalachia. West Virginia, in particular, has seen a recent rejuvenation in its oil production. Injecting money and jobs into this industry may help some of America’s most impoverished regions, but some fear American consumption is far too high to be sated by an increase in domestic production.

Further, American oil production has traditionally struggled to compete with international prices. In some senses, the hiking of global oil prices in recent years has been massively beneficial for American oil enterprises, allowing for a more competitive international position.

Oil Prices

This move represents an unprecedented move by the Trump Administration — or any recent administration — in directly reaching out to OPEC with specific requests. Past administrations have asked OPEC to release more reserves and drive prices lower, but have never specified the amount desired. In this case, the amount directly corresponds with estimates of how much oil will be withheld by new Iranian sanctions.

However, assuming oil prices continue on their current trend, the increasing unaffordability of foreign oil could send ripples through the international economic web. For some American oil ventures, the continued price drive by foreign competitors spells opportunity. Others interested in alternate energy sources see the rising prices as a chance to reach the American public.