Per our previous post on policy decisions that favor production in Iran and Venezuela over US offshore production, Senator Manchin made this statement:
“I also want to briefly express at the outset my strong concerns about the news last night that this administration has lifted most sanctions on Venezuelan oil for the next 6 months. On the heels of announcing the smallest 5-year offshore oil and gas leasing plan in decades, this administration is turning to Venezuela — they know I have a problem and I’m sure many of you will have feelings on this — one of the world’s dirtiest energy producers and an oppressor of its own people, to help make up the production that they refuse to allow in America. I understand that the administration believes this will encourage Venezuela to make democratic reforms, that has been tried, and we’ve failed before. It makes no sense at all to reward bad actors before they actually take the action you want. We tried that with Iran, and now here we are with Venezuela.” said Chairman Manchin.
Given that further depletion of the SPR was no longer politically acceptable, a cynic might suggest that oil market considerations associated with the end of SPR withdrawals and OPEC tightening (Iran is currently exempt from OPEC quotas) factored into decisions regarding the relaxation of sanctions on Iran.
S&P Global reports on the surge in Iranian oil production and exports. In the quote below, note the concern about the higher oil prices that might result from tightening the sanctions. If oil price concerns are driving critical foreign policy decisions, this would be a rather stunning indictment of US energy policy, which is sometimes perceived as being more hostile toward domestic producers than international adversaries.
“Before the war, US-Iranian tensions had eased, which facilitated higher Iranian oil exports. Iranian crude oil production increased 500,000 b/d from March to September 2023 — to 3.1 million b/d from 2.6 million,” the analysts said. “Biden will be under pressure to enforce sanctions and curtail Iranian export revenue. This is a challenging situation for the Biden administration, which wants more oil on the market, not less. The attacks on Israel could override the oil issue.“
Q. I wanted to ask you about oil, if I could, and the money that it’s bringing in. So, is the amount of oil that’s being brought in by Iran — specifically, records amount, 85 percent to China, more oil being sold above the price cap from Russia — giving the President any pause on changing these energy policies for fossil fuels here in the U.S.?
MR. KIRBY: I would — just let me back up a little bit. I mean, it’s important to remember that Iran gets most of its oil revenue off the black market and evad- — evading sanctions, which they do. It’s costly to them. In fact, our evidence is that they really only receive a fraction of the market value of the oil that they sell, because they have to sell it on the black market.
We will always, as we do in any case, typically, revisit sanctions regimes to see if they need to be changed or adjusted, specifically with respect to Iranian oil.
The President, since the beginning of the administration, has been concerned about making sure we have a viable global market for oil, working hard to keep the prices of gasoline down here in the United States. Part of that is making sure you remove some of the volatility in that global supply and demand.
I don’t have any announcements or decisions to make today with respect to any changes to the domestic oil production.
Q But isn’t it a national security issue when you have countries that are profiting off of oil and the increased price of oil that don’t like Israel, that don’t like America?
MR. KIRBY: We don’t want, for instance, Russia to be able to — to get a windfall in profits from the oil market so that they can then turn that around and — and apply that to weapons in Ukraine. We certainly don’t want to see Iran do — be able to do much of the same, which is why we’re — we’re putting as much pressure on them as we are.
Q So, why not increase oil production here?
MR. KIRBY: I — again, I don’t have any announcements to make today.
On a related note, the Strategic Petroleum Reserve has remained at historic low levels. The current volume is 351.3 million barrels, a slight rise from the low of 346.8 million barrels in July, the lowest volume since 8/19/1983 when the SPR was still being filled. Have the oil embargoes following the Yom Kippur War, the reason for the SPR’s existence, been forgotten?
BP owns almost a fifth of Russia’s largest oil producer Rosneft. UK-listed rival Shell controls 27.5 per cent of Gazprom’s huge Sakhalin-2 offshore gas project in Russia’s far east. Exxon has been operating in Russia for 25 years and producing oil and gas in eastern Russia since 2005 in a partnership involving two Rosneft affiliates.
More than 20 European countries import gas from Russia. The Czech Republic and Latvia import 100% of their gas from Russia. Hungary, Slovakia, Bulgaria, Finland, Germany, and Poland import more than half of their gas from Russia.
Clumsy sanctions could send oil and gas prices soaring to Russia’s benefit and the West’s detriment. We should first remove the sanctions that have intentionally and inadvertently been imposed on our own producers, including leasing blockades and permitting obstacles. The Ukraine crisis and its side effects will be with us for years, as will the demand for oil and gas. We need both immediate and longer term supply solutions.
Bud's Offshore Energy (BOE) 