(Bloomberg) -- American drillers will increase oil production at a slower pace than previously expected amid surging costs, stymieing the Biden administration’s hope that the industry will boost output to tame fuel prices. 

The US cut its forecast for domestic oil production to 11.9 million barrels a day this year, compared with a previous estimate of 12.01 million, the Energy Information Administration said in a monthly report. It’s the first time 2022 supply was forecast under the 12 million barrel mark since February but an increase from last year’s output of 11.2 million barrels a day.  

The Biden administration is trying to entice the industry to add more output as it battles historically high fuel inflation and the worst supply disruption in decades triggered by Russia’s war. Last week, it announced a plan to refill the nation’s Strategic Reserves, which is being drawn down currently in an effort to tamp down triple-digit oil prices. The plan to repurchase barrels for the emergency stockpile is a signal to producers that there will be a market for their future supply even if commercial demand eventually sags, S&P Global Inc. Vice Chairman Dan Yergin said in an interview with Bloomberg TV. 

The report comes as US retail fuel prices rallied to a record Tuesday. 

 

US producers have increased drilling but at a moderate rate compared to years past of runaway production during price spikes, as they focus more on shareholder returns. Also thwarting any potentially ambitious growth plans are soaring costs in the oil sector, which is forcing companies to revise annual spending plans just to meet output targets.

The agency also lowered its 2023 forecast to 12.85 million barrels a day of oil production, though this still surpasses the previous annual average record of 12.3 million set in 2019.

Meanwhile, global consumption of petroleum and liquid fuels is forecast to decline this year to 99.6 million barrels a day, down from the previous estimates at 99.8 million, according to the EIA’S Short-Term Energy Outlook. The agency also cut its demand forecast for next year to 101.5 million barrels a day.  

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