(Headline USA) Despite President Joe Biden’s notorious fist-bump with Saudi Crown Prince Mohammed bin Salman, the U.S. president’s pugilistic rhetoric appears to have made him no friends in the Middle East, where many seem to vuew the Democrat regime not as a threat but a nuissance.
Even as Biden has destroyed the U.S. energy independence effected by his predecessor, former President Donald Trump, he has relied on the Strategic Petroleum Reserves replenished by Trump to put a band-aid over the problem of escalating gas prices.
But with those oil reserves now close to depletion and real emergencies at hand, it is unlikely Biden will be able to contain the situation through the November midterm election, when skyrocketing gas prices (and inflation on other consumer goods) may be the No. 1 issue that influences voters.
As if Biden’s self-inflicted crises weren’t bad enough, the world’s leading alliance of oil-exporters now may be looking to stack the deck against him and his fellow Democrats through supply and demand.
The OPEC+ alliance on Wednesday will debate a potentially large cut in the amount of crude it ships to the global economy—a move that could help Russia weather a looming European ban on oil imports and raise gasoline prices for U.S. drivers just ahead of the midterms.
Energy ministers from the OPEC cartel, whose leading member is Saudi Arabia, and allied non-members including Russia are meeting in person at the group’s Vienna headquarters for the first time since early 2020 at the start of the COVID-19 pandemic.
Russian Deputy Prime Minister Alexander Novak, who has been sanctioned by the U.S., was attending the meeting in Austria’s capital.
A production cut could benefit Russia by establishing higher prices ahead of a European Union ban on most Russian oil imports, a sanction over the invasion of Ukraine that takes effect at the end of the year, analysts at Commerzbank say.
Russia “will need to find new buyers for its oil when the EU embargo comes into force in early December and will presumably have to make further price concessions to do so,” the analysts wrote in a note. “Higher prices beforehand—boosted by production cuts elsewhere—would therefore doubtless be very welcome.”
Moscow also faces a separate push by the U.S. and the other Group of Seven wealthy democracies to impose a price cap on Russian oil by Dec. 5. The EU agreed Wednesday on new sanctions that are expected to include a price cap on Russian oil, an EU official said.
Oil prices surged this summer as markets worried about the loss of Russian supplies from sanctions over the war in Ukraine, but they slipped as fears about recessions in major economies and China’s COVID-19 restrictions weighed on demand for crude.
Biden’s use of the emergency reserves also helped drive down prices—not only in the U.S., but in China and Europe, to whom he sold an estimated million barrels of U.S. oil as consumers at home suffered.
The fall in oil prices has been a boon to U.S. drivers, who saw lower gasoline prices at the pump before costs recently started ticking up, and for Biden as his Democratic Party gears up for congressional elections next month.
While Biden was quick to take credit for the drop in prices (which never offset the increase he caused), he has been loath to accept responsibility for the increase, whether due to his failed domestic energy policies or his catastrophic foreign policy.
White House Press Secretary Karine Jean-Pierre deflected this week when asked about the new uptick.
DOOCY: "You've said the president was responsible for gas prices coming down. Is he responsible for gas prices going up?"
KJP: "So, it's a lot more nuanced than that." pic.twitter.com/8P1P1JPa2v
— Townhall.com (@townhallcom) October 4, 2022
Jean-Pierre told reporters Tuesday that the U.S. would not extend releases from its strategic reserve to increase global supplies.
“We’re not considering new releases,” Jean-Pierre said.
HOW BIG AN IMPACT?
It’s unclear how much impact a production cut would have on oil prices—and thus gasoline prices—because members are already unable to meet the quotas set by OPEC+.
Yet, Saudi Arabia may be unwilling to strain its relationship with Russia even if the world’s largest oil exporter had any reservations about cutbacks and has recently has drawn leaders from Biden to German Chancellor Olaf Scholz to talk about energy supplies.
The Commerzbank analysts said a small trim would likely see oil prices fall further, while the group would need to remove at least 500,000 barrels day from the market to bolster prices.
Such a production cut “would undoubtedly signal to the market the determination and resolve of the cartel to support oil prices,” said UniCredit economist Edoardo Campanella. But supply would drop by less than announced.
“If the group cuts target production by 1 million barrels per day, actual output would likely drop by about 550,000 barrels per day—as countries like Russia or Nigeria that are producing below quota would see their formal target decline but remaining above what they can currently produce,” Campanella said.
At its last meeting in September, the group reduced the amount of oil it produces by 100,000 barrels a day in October. That token cut didn’t do much to boost lower oil prices, but it put markets on notice that OPEC+ was willing to act if prices kept falling.
International benchmark Brent has sagged as low as $84 in recent days after spending most of the summer months over $100 per barrel. U.S. oil prices fell below $80 per barrel Friday. Ahead of the meeting, U.S. crude traded at $86.38 and Brent at $91.66.
Gasoline prices recently turned up because of refinery outages in California and Ohio, and vary widely, from over $6 per gallon in California to under $3 in some parts of Texas and the Gulf Coast, according to motoring club federation AAA. The national average of $3.80 is up slightly but down from a record high on June 14.
One major factor weighing on oil prices has been fears of recessions in places like the U.S. and Europe and slowdowns due to China’s strict COVID-19 measures.
Higher inflation is sapping consumer purchasing power, while central banks are raising interest rates to cool off overheating prices, a step that could slow economic growth. Oil prices at their summer highs, and higher natural gas prices boosted by Russian cutbacks to Europe, helped fuel inflation.
Adapted from reporting by the Associated Press