US willing to tap SPR again, urges more domestic oil production: Granholm
The Biden administration is willing to tap into the US Strategic Petroleum Reserve again to help lower record-high fuel prices and it is publicly urging energy companies to produce as much crude oil and natural gas as they can to help meet global demand amid the ongoing Russian war in Ukraine, US Energy Secretary Jennifer Granholm said.
The friendlier rhetoric from the Biden administration toward oil and gas comes a day after the White House banned US imports of Russian oil and crude oil prices hit new 13-year highs. The US already is in the middle of releasing 30 million barrels of oil from the SPR as part of a coordinated global release of more than 60 million barrels led by the International Energy Agency.
Speaking at CERAWeek by S&P Global energy conference in Houston, Granholm said the administration will not hesitate to release more barrels from the SPR.
“That may have to happen again, depending on what’s going on,” Granholm said. “We are very focused on alleviating pain at the pump.”
Earlier, the IEA said it is open to another coordinated release from global emergency stocks. “We are ready to [release] as much oil as is needed,” IEA head Fatih Birol said March 8, noting that 60 million barrels were only 4% of IEA members’ total strategic oil reserves.
Although the White House typically is more focused on the ongoing energy transition and reducing the world’s reliance on fossil fuels because of climate change, Granholm said Biden recognizes the imperative for more domestic oil and gas in the present.
“In this moment of crisis, we need more supply,” she said. “Right now, we need oil and gas production to rise to meet current demand.”
US crude production was unchanged last week at 11.6 million b/d, Energy Information Administration data showed March 9. But the EIA’s short-term energy outlook raised the outlook for US oil production by 60,000 b/d from last month’s STEO to 12.03 million b/d for 2022 and by 390,000 b/d to 12.99 million b/d for 2023.
While some projections show US crude volumes rising by 1 million b/d from January to year-end 2022, others have pointed to supply chain and workforce bottlenecks, as well as depleting inventories of prime drilled-but-uncompleted wells, which will slow the production growth. For instance, Occidental Petroleum CEO Vicki Hollub on March 8 described a “really dire situation” in which few US producers prepared for notable growth in 2022.
Granholm acknowledged those challenges, but called on producers to do all they can.
At the same time, she emphasized that they can “walk and chew gum at the same time” and still focus on the energy transition. She bemoaned “the same old DC BS,” such as critics decrying canceled pipeline projects — she did not mention Keystone XL specifically — and she urged producers to partner with the administration.
“Aren’t we finally ready to work together to confront this crisis, and come out stronger on the other side?” Granholm asked.
She also said the administration and energy companies must work together on rising cybersecurity threats to infrastructure, citing the 2021 hack of the Colonial Pipeline. “(Vladimir) Putin is cornered, and he’s going to do whatever he can,” she said of the Russian president.
Crude prices dip with OPEC comments
Despite a previous unwillingness from OPEC to further hike oil production, crude prices were falling March 9 after the UAE ambassador to the US said the key Gulf producer will put pressure on OPEC to increase oil production.
“We favor production increases and will be encouraging OPEC to consider higher production levels,” Ambassador Yousef Al Otaiba said in a statement. The comment came a day after a high-level call between UAE foreign minister and senior royal Abdullah bin Zayed and his US counterpart, Secretary of State Antony Blinken.
However, the OPEC+ producer alliance with the Kremlin refused in its last meeting March 2 to budge from its strategy of drip-feeding 400,000 b/d of production back to the market. OPEC ministers next meet March 31.
The UAE and Saudi Arabia are the group’s only producers with significant enough volumes of spare capacity available to help ease prices.
According to the latest S&P Global Commodity Insights survey of OPEC output, the UAE produced 2.95 million b/d in February, just under its quota.
OPEC and its allies posted their highest monthly crude oil output increase in February since July 2021, but the 19 members with quotas still fell 764,000 b/d short of their collective targets, according to the survey.
OPEC Secretary-General Mohammed Barkindo said earlier in the week at CERAWeek that the group was planning to “stay the course” on its production policy.
In a late March 8 discussion, Barkindo said global oil shortages thus far are geopolitical in nature, and not physical. But he acknowledged that will change in due time because of the severe financial sanctions imposed on Russia.
“You probably need a magician to produce and continue to export 7 million barrels of oil,” Barkindo said, citing Russia’s daily exports of crude and petroleum products. “The impacts of these sanctions will definitely catch up with the producers.”
So he appealed for peace and diplomacy to win out. He said the timing is awful after years of underinvestment in oil and gas and the recent demand shock from the COVID-19 pandemic.
“If we allow this crisis to spiral out of control, it will wreck all we have achieved,” Barkindo said. “I am reasonably optimistic that it’s not beyond us as a people.”