Earlier this month, the 23-member oil-cartel known as OPEC+ (Organization of the Petroleum Exporting Countries), of which Russia is a member and led by Saudi Arabia, announced it would slash production by 2 million barrels per day. The production cut is equal to 2% of the world’s daily oil production. The cut was seen as a slap in the face to President Biden. The move by OPEC+ drew angry criticism from Washington and the White House accused the Kingdom of taking sides with Russia.
In response the Biden Administration said it plans to re-evaluate the U.S.’s eight-decade old alliance with Saudi Arabia. It is hard to forget that during the Presidential campaign in 2020, the president’s money quote was he promised to make Saudi Arabia a “pariah” state. He said there is “very little social redeeming value in the present government in Saudi Arabia.” He has criticized the Crown Prince for his role in the killing of Washington Post journalist and political opponent Jamal Khashoggi. All this while courting Iran, an arch enemy of Saudi Arabia, in the hopes of striking a nuclear deal that would give Tehran billions of dollars to threaten the security of Gulf States.
Still for months the leader of the free world lobbied Saudi Arabia to help ease energy prices by pumping more oil into the market. These pleas fell on deaf ears. The Administration urged the Saudis to wait for the next meeting of OPEC+ on Dec. 4 before making a decision on production cuts. The Administration wants to hold down gas prices to advance the Democrats’ chances in the midterm congressional elections. Now the administration has announced it will sell 15 million more barrels of petroleum from the nation’s strategic reserve, aiming to ease gas prices. The White House said it was prepared for more sales of the $400 million barrels in the strategic petroleum reserve if there are further disruptions in the world markets.
Not only that but the White House is starting to relax some of the sanctions on the authoritarian government in Venezuela which sits atop some of the world’s largest oil reserves to allow Chevron to resume pumping oil and exporting oil to the U.S. There is an ominous sound of barrel scraping here.
Congressmen from both parties called for retribution against the cartel as well. Some called for taking direct action against Saudi Arabia such as denying it access to military hardware and passing legislation allowing OPEC+ members to be sued under antitrust laws.
The Saudi’s rejected the accusation that it was getting in bed with Russia. They stated that the decision to cut output was driven purely by economic considerations and in response to future uncertainty about demand for oil. OPEC+ was doing what it usually does. They want to regulate the flow of crude oil to world markets in an effort to control prices. That is what the cartel is all about, full stop.. They are seeking to protect their national economic interests as has always been the case. The Saudi’s need money to provide for a decarbonized future and to fund its on-off war in Yemen.
The irony here is that according to the U.S. Energy Information Administration in September 2019, the U.S. became a net exporter of crude oil and petroleum products for the first time since 1973. In 2022, the U.S. will again be a net oil importer. The Administration’s policy has been to ween the American economy off fossil fuels in favor of clean energy. Quite apart from bans on fracking, bans on drilling, the President’s first act in 2021 was to scrap the cross-border permit for Canada’s XL pipeline which was projected to carry 900,000 barrels of crude oil a day into the U.S.
Events like the coronavirus and the tragic war in Ukraine should have revealed the dangers of being dependent on unreliable regimes and geopolitical adversaries. These choices have left the U.S. in an untenable, vulnerable place.