Analysis by Energy Workforce President Tim Tarpley
Saudi Arabia announced Sunday that it would begin cutting oil production by 1 million barrels per day (bpd) in July to support the “stability and balance of oil markets.” The decision was announced in the context of an OPEC+ meeting in Vienna, but the announcement will be undertaken by Saudi Arabia on their own and not as part of a larger set of coordinated cuts. Saudi Arabia says the cuts will last at least a month and could be extended longer. Currently, Saudi Arabia produces 9 million bpd, which is about 1.5 million fewer barrels than earlier this year.
The effects of this decision may cause a short-term spike in oil prices, especially as it corresponds with the summer driving season. There has been speculation for many months that we could enter a period of economic slowdown, however the world appears to have avoided a recession. Some economic indicators continue to trend downward, however others remain stable or positive, so the verdict is not yet clear on which way the economy is truly going. So far, other nations have been slow to act on their own production cuts. While there has been some pressure on African countries and Russia to cut production, they have not yet done so. The United Arab Emirates has actually announced it intends to increase production.
This news could further boost U.S. production and crude oil exports which have already been on the rise. In March, U.S. exports touched a record 4.5 million bpd. The U.S. product is competitive on the world market price wise, and increasing demand from Asia, especially China, is fueling this demand. U.S. shale production has been slowly moving up all year and is forecast to hit 5.71 million bpd this month.
Senate Approves Debt Ceiling Package, More Permitting Reform Needed
After passing the House 314-117, the debt limit deal passed the Senate last Thursday night with a 63-36 vote. The package contained two provisions of interest to our sector, including language to expedite federal National Environmental Policy Act (NEPA) reviews and containing language to approve and expedite the Mountain Valley natural gas pipeline in West Virginia, which has long been pushed by Sen. Joe Manchin (D-WVA). Notably, however, the package did not contain litigation reform, which the industry has long been asking for in order to alleviate the slew of lawsuits and legal wrangling that are being used to slow down and stifle the construction of energy infrastructure projects within the United States.
There is good and bad news with the passage of these provisions which made up part of larger permitting reform packages. The bad news is these were some of the biggest low-hanging fruits for permitting reform that were able to get the most support, so now they are off the table for future negotiations. These provisions could have been used to sweeten the deal later for a larger package.
The good news is that something got done and passed Congress, so we know that it is possible to pass the rest of reforms with the right legislative vehicle. Major provisions like transmission and litigation reform are still outstanding, and a bipartisan coalition will again be necessary. Hope is starting to center around the large Defense authorization bill that will need to pass later this year as potentially being the vehicle to get more done.
If not for that bill, there will likely be one last chance on the end-of-year omnibus appropriations package. Energy Workforce will continue to work with our allies on the Hill to ensure that we do everything that is possible to get the rest of the provisions that we care about over the finish line.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.