President Joe Biden faced an awkward moment during the international climate change conference in Glasgow, Scotland, when he was asked at a press conference about inflation back home, including gasoline prices.
“If you take a look at gas prices and you take a look at oil prices, that is a consequence of, thus far, the refusal of Russia or the OPEC nations to pump more oil,” Biden said Nov. 2 at the United Nations’ COP26 summit. “And we’ll see what happens on that score sooner than later.”
OPEC is the group of 13 primarily Middle Eastern and African oil exporters that act collectively to set production levels; it has been joined recently in decision-making by Russia and some other non-member nations.
One reason for the awkwardness is that Biden was at a conference that aimed to reduce carbon emissions, including from oil, yet he felt obligated to call for greater output by oil-producing nations.
The administration’s request for greater production “is a recognition that oil is by far the leading energy source for the U.S. and global economy today, even with aspirations for a rapid transition to a lower-carbon future,” said Mark Finley, a fellow in energy and global oil at Rice University’s Center for Energy Studies.
Exacerbating the awkwardness is that the U.S. is itself a major oil producer. In fact, the U.S. is the world’s biggest, accounting for about 20 percent of the world’s output. So we decided to take a closer look at the reasons for the current high price of oil and what the U.S. can do about it. (The White House did not respond to an inquiry for this article.)
Are OPEC and Russia to blame?
At the root of the price increases for gasoline, as with so many other products, is the coronavirus pandemic. Since the initial economic wallop from the virus in the spring of 2020, demand for gasoline has risen steadily as business activity has increased. Yet supply hasn’t been able to recover as quickly, thanks to delays in restoring drilling capacity, higher transportation costs, and sluggish production increases.
As a result, prices of crude oil have risen consistently in recent months, though they are still about 40% below their peak levels of July 2008.
These higher prices ultimately show up in the prices Americans pay for refined oil products like gasoline.
“Higher prices at the pump matter,” Finley said. By his calculations, he said, just this year’s increases are costing each American household an additional $1,000.
So how do Russia and OPEC play into this? Together, they account for just over half of global production, so experts agree that they can do the most to increase supply, which would result in lower prices at the pump.
After cutting production aggressively in the early days of the pandemic, the OPEC-led group has been gradually, but not fully, restoring production. Since July, OPEC and Russia have agreed to raise production by 400,000 barrels per day every month, less than the U.S. and other oil importers like China, India, and Japan have been seeking.