Where he previously called Saudi Arabia a pariah state for the brutal murder of journalist Jamal Khashoggi, Biden even went to the country last summer to convince the Saudis to pump more oil.
Because more oil is in dire need. Europe and the United States are struggling with high energy prices and mid-term elections will soon be held in America. Biden’s chances of a favorable election result are greatly reduced due to high gasoline prices, and so he tried to flatter Saudi Crown Prince Mohammed Bin Salman.
Initially, it seemed to work: Saudi Arabia recently increased oil production. Resulting in falling prices. The price of oil, which recently hit nearly $ 125, has slipped to nearly $ 80 in the past few weeks. The faltering global economy also played a role. Due to the continuing crown problems in China and the war in Ukraine, there is now less demand for oil than expected.
Convenient price
The Middle East has witnessed the rapid decline with dismay and wants to avoid a collapse in the price of oil. This happened, for example, at the beginning of the pandemic and hit oil-producing countries hard. Although a comparable scenario is not possible now, OPEC countries find $ 90 a barrel to be a comfortable price. And more than ever, I am now able to impose this high level – simply by pumping less. There are hardly any alternatives, especially now that Europe is about to turn its back on Russian oil.
But there is also a political component. With the intervention, which is very bad for the Americans, Saudi Arabia proves to feel more independent from the United States. Russia and China have become more important partners in recent years and Russia in particular now benefits from higher prices. It will soon no longer be able to sell its oil to Europe and will have to sell it to countries like China and India.
India makes a lot of money from the diesel it produces and then sells to Europe, where there is a shortage, so they want Russian oil there. Albeit at a friendly price. The higher the global price, the less Moscow will have to surrender.
Provocation
Analysts disagree on which of the two topics weighs more (price or politics). In any case, the Americans consider the measure a provocation.
The market reacted tepid to the limitation of production. Partly because it was expected. And because the limit in practice means little: the OPEC countries have already had the greatest difficulties in carrying out previously promised productive expansions. Many countries are on edge and simply can’t pump oil anymore, in part because investments in new fields have been postponed due to the pandemic.
The extra that Biden begged for isn’t there. The consequences will be visible in the US at the pump, and perhaps even in the November midterm election results.
