The decision by global oil majors to cut output comes only weeks before crucial midterm elections when the price of gasoline might be the deciding factor. This puts President Biden in a difficult position. Should he maintain his approach of appeasing Saudi Arabia or take countermeasures?
Washingtonians viewed the Saudi-led OPEC Plus energy cartel’s announcement that it would pump two million fewer barrels per day as a stab in the back of Mr. Biden, who had only three months prior abandoned his promise to make Saudi Arabia a “pariah” and travelled there to court the kingdom’s autocratic crown prince.
Mr. Biden must now decide what to do in light of this apparent betrayal. Thursday, he told reporters that he was “disappointed” and was contemplating “alternatives,” both of which were deliberately vague. There has been considerable pressure on Vice President Biden to penalise Riyadh from other Democrats who are upset with what they regard as the president’s undue deference to the Saudis and who are keen to display toughness before their people go to the polls.
Representative Tom Malinowski (D-NJ) suggested in an interview that American troops stationed in Saudi Arabia should be withdrawn immediately. That’s sure to grab their interest! Reparation for repatriation. Put them on the spot. Do they really expect to replace the United States as a reliable security partner with Russia or China? They have already calculated that it’s impossible for them to carry it through.
New York Senator and Majority Leader Chuck Schumer said it was disastrous for Saudi Arabia to team up with Russia’s President Vladimir V. Putin to prop up oil prices.
Because several oil companies were already falling short of their expectations, his government urged prudence, hoping that the reduction in daily output would equal to maybe half of the two million barrel aim. Biden’s advisors were more interested in reversing Saudi Arabia’s decision by releasing additional oil from the Strategic Petroleum Reserve and maybe pursuing reconciliation with oil-producing Venezuela than in punishing the kingdom.
Additionally, the government looked to be exploring measures, such as limiting the export of petroleum products, to put pressure on local energy businesses to lower retail prices. Reporters were informed by the president’s national economic advisor, Brian Deese, that although the administration has not announced any new initiatives in this area, it is still considering several options.
Mr. Biden had staked his case for the midterm campaign in part on dropping gas prices, so the timing of the OPEC Plus decision could not have been worse for him politically. Chief of Staff Ron Klain’s careful monitoring of the drop in gas prices over the course of many months gave Democrats a shot in the arm.
However, refinery problems on the West Coast and in the Midwest contributed to the gradual increase in gas prices that began before the Saudi-led effort. Since Monday, demand has climbed and stockpiles have decreased, causing the national average to rise by seven cents, to $3.86. Despite this, prices are still much below their June high of more over $5 per gallon.
The Saudis have supplied documents and charts to administration officials defending the output decrease, insisting that it was not intended as a blow at Mr. Biden. The Saudis have expressed concern to American officials that the oil price, which has recently dropped to about $80 a barrel, may fall much deeper into the $70s and potentially the $60s, rendering the kingdom’s energy-dependent budget unsustainable.
The true crisis, according to officials in the Biden administration, may not occur until December, when a price ceiling imposed by the United States to reduce Russian oil profits goes into force and a ban on the purchase of Russian petroleum by the European Union begins.
In response to the reduction in output, Mr. Biden has few alternatives, each of which comes with costs and drawbacks. With the Strategic Petroleum Reserve at its lowest level in four decades, his decision to release additional oil raises concerns about supply in the event of conflict or a natural calamity such as another storm.
He might lobby for restrictions on shipping refined fuels like gasoline and diesel abroad in order to increase home production and bring down costs. However, doing so would be detrimental to trade partners, especially European allies trying to wean themselves off of Russian energy, and would exacerbate global inflationary pressures.
In order to expand domestic production, the government might loosen laws on drilling, exploration, and pipeline construction and make additional federal lands and waterways available for drilling. This, however, could spark a reaction among environmentalists.
If sanctions were lifted on Iran and Venezuela, over a million barrels of oil per day might flow to markets again, possibly lowering prices and providing an alternative to the Russian barrels now exported to Chinese and Indian refineries. However, there has been little progress in the nuclear negotiations with Iran, and the chances of an agreement with Venezuela remain unclear.
The Biden administration reportedly planned to ease sanctions to enable Chevron to continue pumping in return for a shift toward elections in 2024, as reported by the Wall Street Journal. There are no plans to modify our sanctions approach without positive measures from the Maduro dictatorship,” the White House said in a statement.
The president defended his July trip to Saudi Arabia, during which he bumped fists with the country’s de facto ruler, Crown Prince Mohammed bin Salman, despite having pledged during the campaign to isolate the kingdom for the murder of Jamal Khashoggi, a Saudi journalist and U.S. resident who was killed on what the C.I.A. claims were Prince Mohammed’s orders.
Democratic lawmakers like Mr. Malinowski have called on the president to do more than just voice his disapproval. He co-introduced a measure to pull American soldiers and defence equipment out of Saudi Arabia and the United Arab Emirates with Democratic Representatives Sean Casten of Illinois and Susan Wild of Pennsylvania.