Energy information chief blames market for high fuel prices
The head of the Energy Information Administration (EIA) testified Tuesday that market forces, rather than specific policies taken by the Biden administration, were to blame for high fuel prices.
The remarks by Stephen Nalley, acting administrator of EIA, came during a Senate Energy and Natural Resources Committee hearing.
“World consumption of petroleum is recovering faster than production, which is resulting in steady draws on global oil inventories and upward pressure on prices,” Nalley said, in his opening remarks.
The EIA is considered a nonpolitical statistics agency within the Energy Department.
The Energy and Natural Resources Committee, which is led by Sen. Joe Manchin (D-W.Va.), put together the hearing to examine the causes, outlook and implications of energy price trends, which are currently high both in the U.S. and around the world.
Nalley argued that prices are high because oil supply is not recovering as quickly as demand. A contributor to this imbalance, he said, is less enthusiasm from investors amid the economic downturn.
“One of the major contributing factors is the economic downturn,” he said. “Investors were hit pretty hard financially. I think they’re trying to reposition themselves for the long term, so there’s been a lot of written speculation about why they’re not coming back into the market.”
Nalley also predicted that oil prices would remain high this year but could see a drop next year.
“We expect global oil prices to remain near current levels for the rest of this year but to drop by about $10 per barrel next year as production increases in the United States, OPEC, and other countries,” he said, referring to a group of oil-exporting nations.
He also said the agency believes that home heating bills in the U.S. will increase this winter.
As of Tuesday, gasoline prices were situated at about $3.41 per gallon on average and have remained above $3 for months. They dipped last year because of the coronavirus, as fewer people were traveling or commuting, but have since bounced back higher than they were before the pandemic.
Republicans have hammered Democrats over gasoline prices and inflation, criticizing both the Biden administration’s policies and Democratic lawmakers’ efforts to pass a major spending package in Congress.
These same criticisms extended into the hearing as the GOP took aim at both the administration’s policies and their Democratic colleagues.
“The House Democrats’ bill will increase energy prices,” said Sen. John Barrasso (Wyo.), the top committee Republican. “It will impose a natural gas tax on American families. … At a time of skyrocketing energy prices, House Democrats want to make it even more expensive for families to heat their homes.”
The Democrats’ bill had originally sought to put a fee on emissions of a potent climate-warming gas called methane from oil and gas production.
But the latest iteration introduced in the House uses a carrots and sticks approach, providing incentives for companies to cut methane releases and charging them for releases above a certain threshold.
During the hearing, International Energy Agency chief energy economist Tim Gould pointed out that in Europe, countries that rely on renewables didn’t see as great of a jump in electricity prices compared to those relying on natural gas.
“Countries that had the largest increase were those that had the largest share of natural gas generation, and also the most limited interconnections with other countries,” he said, citing an analysis that came out this week.
“Countries that had the smallest increase in electricity prices were those primarily in the Nordic countries that have invested primarily in renewables,” he added, noting that Poland, which heavily relies on coal, also did not see a large price surge.
Democrats on the panel railed against U.S. fuel exports, arguing that reigning in shipments abroad could increase domestic supply.
“We are exporting our principal advantage in the world economy,” said Sen. Angus King (I-Maine), who caucuses with Democrats. “We are literally subsidizing Chinese manufacturing by sending them our natural gas.”
Asked by Manchin if this was causing U.S. prices to spike, Nalley said, “Clearly there’s a connection there that we’re seeing higher prices.”
He later warned, though, that curtailing exports could cause prices internationally to “skyrocket.”
Earlier this month, a group of 11 Democrats wrote to President Biden calling on him to both ban crude oil exports and tap into the country’s oil reserves to tackle fuel prices.
Nalley was also asked about releasing fuel from the Strategic Petroleum Reserve and said it could provide a little temporary relief.
“We did some recent analysis where … somewhere between 15 million barrels to 48 million barrels for a short period of time would bring down the price of crude oil about $2 per barrel, about 5 to 10 cents at the pump,” he said.
Earlier this month, the Biden administration indicated that it could tap the strategic petroleum reserve to lower gasoline prices, with Energy Secretary Jennifer Granholm saying “that’s one of the tools that [Biden] has, and he’s certainly looking at that.”