OPEC Slashes Oil Production As Washington Watches
Photo by Dawn McDonald / Unsplash
What’s happening: Last week, the Organization of the Petroleum Exporting Countries (OPEC), led by Russia and Saudi Arabia, decided to slash oil production, a cut equal to almost 4 percent of the global demand. The latest cuts would dent global crude oil output by more than a million daily barrels, potentially raising oil prices by up to $10 per barrel.
Washington isn’t happy: The Biden administration is concerned that a cut in production will cause gas prices to rise at home as the 2024 election approaches. Gas prices have already risen since the cuts began, and one analyst estimates prices to climb toward $4 per gallon in the coming months. The cuts will also likely exacerbate Europe’s inflation problem.
Between the lines: America’s position in the Middle East is weakening in general. (Just last month, Saudi Arabia aligned with Beijing instead of Washington in a peace deal.) It’s become apparent that the Biden administration lacks influence over global oil prices, in stark comparison to the Trump administration, which successfully negotiated deals with the oil cartel. Now, adversarial Moscow and Riyadh have proven they can leverage oil as a weapon.
“It is my profound duty to make it clear to the world that losing emergency stocks may become painful in the months to come,” Saudi Arabia’s Energy Minister Abdulaziz bin Salman said last year.
Biden’s failure: The Biden administration drained the American Strategic Petroleum Reserve—an emergency energy fallback—to mitigate rising gas prices caused by the Ukraine war. The administration had intended to refill the reserve as oil prices fell last year but failed to strike a deal with Saudi Arabia. With oil costs rising, America has lost important leverage in dealing with an energy crisis.