Yves here. One of the leading stories tonight is how furious the Biden Administration is over the OPEC+ agreement to cut oil production by 2 million barrels a day. Team Biden is taking it personally, depicting it as a surprise, maliciously timed so as to hurt Democratic party prospects in the midterms, and proof that the Saudis, one of America’s long-standing allies in the Mideast, is working in concert with Russia.
What is striking about this temper tantrum is that it comes off as yet another demonstration of US geopolitical immaturity.
First, Mr. Market was not surprised and oil prices moved little on the news, raising questions as to how the Biden crew missed what investors saw as obvious. Undue confidence in the power of the hegemon? However, the tepid market response appears also due to the cut not being fully met. From the Financial Times:
The actual fall in output from the Opec+ group’s lowered target is likely to be closer to 1mn b/d, rather than the headline of 2mn b/d, as many of its weaker members have struggled to hit production targets in recent months.
Yet Biden officials claimed that the Saudis didn’t warn them that this might be coming. From Bloomberg:
Top Biden energy adviser Amos Hochstein said Thursday on Bloomberg Television that after a meeting with Saudi Crown Prince Mohammed bin Salman less than two weeks ago, he did not have the impression that OPEC+ was poised for its most dramatic cut since the beginning of the pandemic.
That may be accurate, but why should the Saudis have to spell out what the Biden Administration has made clear it not want to hear, that the Saudis are not going to refrain from lowering production just to save Biden’s bacon? As as the heavyweight in an oil cartel, they are going to manage production as they see fit to manage prices.
Remember that Saudi crown prince Mohammed bin Salam refused to take a call from Biden last March to discuss the oil price crisis triggered by US sanctions on Russia. That is a very strong signal that MbS does not see Riyadh as taking marching orders from Washington.
Also remember, that despite the Administration whinging that this production cut is a dastardly Russian plot (everything bad that can’t be attributed to Trump must be due to Putin), as Alexander Mercouris pointed out in his video on Thursday, the Kremlin was opposed to the modest production cut last month.
In keeping, the Saudi energy minister dressed down a Reuters reporter yesterday over the new agency’s claims of Saudi-Russian collusion and said it had not happened in the recent claimed instances or now:
NOW – Saudi Energy energy minister refuses to answer questions from #Reuters at OPEC+ press conference. pic.twitter.com/Kyi5a5bWur
— Disclose.tv (@disclosetv) October 5, 2022
Scott Ritter gave a good recap of the reasonableness of the US position in June, before Biden was set to meet with MbS, at 1:29:15:
A second sign of geopolitical immaturity is making threats on threats on which you cannot deliver, which is what this fulminating amounts to. Again from Bloomberg:
Furious congressional Democrats urged retaliation against Riyadh, a government seen as an increasingly unreliable ally. Many aired suspicions that the timing of the announcement was intended by the crown prince, whose country Biden once vowed to make a “pariah,” to have maximum impact on the election.
Yet Biden and his team have no good options to respond to the OPEC+ move and would see little benefit from an extended dispute highlighting the president’s inability to influence the cartel.
Third, Team Biden appears not to be bright enough to work out that the G7 oil price cap scheme that it sponsored and still apparently plans to implement despite lack of buy-in outside the “collective West” sphere, is tantamount to trying to break OPEC. So it is possible that the timing was deliberate and retaliatory, and not merely a response to “prices lower than we like for too long.”
Fourth, some of the Biden Administration statements confirm the US-as-colonialist attitude that Putin described pointedly in his speech last week. Notice this section from a Wall Street Journal story:
In Washington, lawmakers focused their attention on Saudi Arabia, saying the country has aligned with Russia despite its attack on Ukraine, making the kingdom unfit for U.S. support.
They are pitching bills that would potentially seize the assets that OPEC member countries own in the U.S., or mandate the removal of U.S. armed forces from Saudi Arabia and the U.A.E.
“The royal Saudi family has never been a trustworthy ally of our nation,” Sen. Dick Durbin (D., Ill.), the No. 2 Democrat in the Senate, tweeted Thursday. “It’s time for our foreign policy to imagine a world without their alliance.”
As Lambert would put it, this is wonderfully clarifying. The US thinks it’s reasonable to steal from countries that won’t bend to its will.
By Tsvetana Paraskova, a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice
- Secretary Blinken has described the decision by OPEC+ to cut production by 2 million bpd as both “disappointing and short-sighted”.
- The Secretary of State said that the U.S. is reviewing its “response options” and consulting closely with Congress.
- President Biden has directed another 10-million-barrel release from the SPR in November and will continue to direct releases as appropriate.
The United States is considering “response options” in its relations with OPEC+ members and its de facto leader Saudi Arabia after the group announced a large 2 million bpd nominal cut in its collective oil production target earlier this week, U.S. Secretary of State Antony Blinken said.
“As to the relationship going forward, we’re reviewing a number of response options. We’re consulting closely with Congress,” Secretary Blinken said at a press conference in Peru late on Thursday.
“We will not do anything that would infringe on our interests – that’s first and foremost what will guide us – and we will keep all of those interests in mind and consult closely with all of the relevant stakeholders as we decide on any steps going forward,” Secretary Blinken added.
Asked to comment on the OPEC+ production cut, he said, “We see the decision as both disappointing and short-sighted, especially as we have a global economy that is dealing with the implications of recovering from COVID, as well as the aggression from Russia in Ukraine, the consequences that’s having.”
“We’ve said all along that supply needs to meet demand, and we’ve been clear about that and we’ve been working on that,” Secretary Blinken said.
Following the OPEC+ decision, U.S. National Security Advisor Jake Sullivan and National Economic Council (NEC) Director Brian Deese said in a statement, “The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.”
“In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” Sullivan and Deese added.
President Joe Biden has directed the Department of Energy to deliver another 10 million barrels from the Strategic Petroleum Reserve (SPR) to the market next month, they added.
“The President will continue to direct SPR releases as appropriate to protect American consumers and promote energy security, and he is directing the Secretary of Energy to explore any additional responsible actions to continue increasing domestic production in the immediate term.”
