The U.S. is likely to ask OPEC member states to pump more crude to help ease a surge in energy prices, according to oil historian Daniel Yergin.
“Joe Biden knows that high gasoline prices are not good for incumbents,” Yergin, vice chairman of IHS Markit, said Monday in a Bloomberg TV interview. “We’ll certainly be hearing more from the administration.”
In August, the Biden administration called on Saudi Arabia and its allies to unload more crude onto global markets, while stressing the importance of “affordable energy.” The Biden administration doesn’t have a lot of tools to deal with current elevated prices, Yergin said.
Crude futures, which have surged above $80 a barrel, could reach $90 as Europe and Asia are likely to use more of the fuel for power generation and heating, substituting for pricier natural gas, he added. Tight gas supplies have led to unprecedented price spikes amid escalating concerns about winter shortages, adding to inflation woes and imperiling the economic recovery from the pandemic. While most power plants can’t switch from gas to oil, dual-fired generators have some flexibility, Yergin said.
Though the Biden administration has pushed for a quicker transition to renewable energy, the crisis ravaging Europe and Asia could lead to a big “re-think” over the timing of cutting back on fossil fuels as available alternatives are still not ready to fully replace them, according to Yergin.
Still, Yergin said the U.S. probably won’t have to ration demand for natural gas using measures such as power curtailments “unless we have a very bad winter.” U.S. gas futures should continue to trade in a range between $5 and $6 per million British thermal units unless “something bizarre” happens, he said.
–With assistance from Jennifer A. Dlouhy.