Oil Prices Surpass $80... Biden's Obsession with Climate Change Shakes His Political Base [Correspondent Diary]

WTI Surpasses $80 per Barrel for the First Time in 7 Years
OPEC's Production Increase Diplomatic Pressure Fails
Strategic Petroleum Reserve Release Confusion Erodes Market Trust
Oil Export Ban Could Trigger Catastrophic Crisis
Rising US Voter Dissatisfaction Threatens Next Year's Midterm Elections

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Criticism is rising that U.S. President Joe Biden is failing to play his role amid the surge in international oil prices. There is even an assessment that the sharp rise in oil prices could become a trigger that shakes his administration.

On the 11th (local time), the price of West Texas Intermediate (WTI) crude oil rose more than 2%, surpassing $80 per barrel and soaring to $81.5. The average gasoline price in the U.S. climbed to $3.274 per gallon. Both are the highest levels in over seven years.

The Wall Street Journal explained that since the end of October last year, WTI has risen more than 120%.

The surge in oil prices surpasses the rise in other raw material prices. Although zinc and lead have stopped rising, oil prices continue to climb daily.

President Biden has emphasized responding to climate change and fostering the clean energy industry since taking office. Diplomatically, he has taken a tough stance against China and Russia. This dynamic, combined with the recovery in oil demand after the COVID-19 pandemic, is diagnosed as pushing oil prices to disastrous levels.

The Biden administration has said it can use all tools to curb rising oil prices, but experts analyze that the U.S. government's response options are limited and may even worsen the situation.

President Biden tried to pressure oil-producing countries to increase oil production but failed. He previously requested oil producers to boost output to support economic recovery, but the producers did not move. It was a loss of face.

Recently, when Russian President Vladimir Putin announced active natural gas supply to Europe, natural gas prices dropped by 10%. This contrasts with the lack of noticeable influence from President Biden.

The U.S. pulled out the 'Plan B' of releasing strategic petroleum reserves, but the effect was only temporary. Instead, the Department of Energy stepped back by stating there are currently no plans to release strategic reserves, causing distrust in the market.

Goldman Sachs criticized the release of strategic reserves as a "stopgap" solution. They assessed that the factor lowering oil prices due to the release is small, and it could rather limit the operation of shale oil producers in the U.S., further driving up gasoline and natural gas prices.

If heating energy use increases this winter, voter dissatisfaction with rising oil prices is expected to soar further. Natural gas prices in the U.S. have tripled in one year.

The possibility of an oil export ban mentioned by Energy Secretary Jennifer Granholm is also assessed to have disastrous consequences. Analysts say that if the U.S. stops crude oil or refined product exports, Brent crude prices will rise even more.

CNN reported that ultimately, the solution is increased production by key oil-producing countries.

President Biden plans to advocate for reducing fossil fuel use to combat climate change at the United Nations Climate Change Conference of the Parties (COP26) to be held next month.

CNN forecasted that President Biden will inevitably have to take a dual approach of pressuring for climate change action while also urging increased oil production.

CNN's assessment is that if oil prices remain strong, dark clouds will hang over the future of the Biden administration. CNN reported that no voters welcome oil prices above $3 per barrel.

Regardless of the reasons behind the rise in oil prices, and regardless of whether the White House deserves criticism, the sharp rise in oil prices is an unwritten rule in U.S. politics as a threat to the administration.

Hurleyma Croft, Head of Commodity Investment at RBC Capital Markets, said, "There is growing concern within the White House that rising oil prices could hamper economic recovery."

The U.S. midterm elections, which can be seen as a midterm evaluation of the Biden administration, are now only one year away.