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With only weeks left until mid-term in November, there are four messages that haunt President Joe Biden and Democrats: OPEC.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said last week that they would cut oil production by two million barrels per day, the largest reduction since the beginning of the pandemic, in a move. that threatens to push gasoline prices higher a few weeks before the US midterm elections.
The group announced the production cut after its first meeting in person since March 2020. The reduction equates to about 2% of global oil demand.
Biden administration In a statement, he criticized the decision as “short-sighted” and said it hurt some countries already suffering from high energy prices more than others.
Production cuts will begin in November. OPEC+, which includes OPEC countries and allies such as Russia, will meet again in December.
We took a single perspective on the OPEC+ decision and better understand how it affects everyone Hussein Al Askariwho teaches international business at George Washington University.
Our conversation, conducted over the phone and slightly modified for flow and brevity, is below.
What matters is: Can you explain to us the latest OPEC decision? What exactly happens?
Soldier: So when the war in Ukraine started, sorry to tell your audience, but the United States wasn’t well prepared for what it was going to do. Russia has punished for this and that. Thus, the price of oil began to rise. Meanwhile, the United States has already imposed sanctions on Russian oil, not gas, or oil. Consequently, there was less Russian oil on the western markets.
In fact, Russia began to sell more and more of its oil to China and India and lower its prices to those countries. So they were buying Russian oil, but there was a shortage of oil.
Another reason why the shortage has developed is basically US sanctions like crazy cowboys, if I may say so. It has imposed sanctions on Venezuela for many years.
But Saudi Arabia, with its new effective ruler known as Mohammed bin Salman, has grown closer to Putin. And so when President Biden went and saw him a few months ago and kind of asked him to increase oil production — I’m sorry to say this, I have to be thrown into this piece of politics — I think America really shamed itself in doing that.
Of course, Mohammed bin Salman did not respond positively. But now, in fact, he’s over the top. It has been agreed within OPEC – and of course he is the main OPEC spokesperson with Russia – that they are going to cut back.
What matters is: what is the OPEC’s decision I mean for the average American?
Soldier: Where we are now, crude oil prices by the end of the year, I think, at the most, will go up by $5 a barrel. Now, many people think that they will rise even more. I don’t think so, because I think the global economy is going to grow less and I think we’re going to see some Venezuelan oil coming into the market, and I think we might see some deals being done, so come to the market.
As for gasoline, I think Americans can probably see prices rise from where they are today, if nothing else, by about 30 to 50 cents a gallon.
However, another problem for Americans is also home heating oil, and this can go up as well. So for the average American, they’ll pay, no matter what, something more per gallon of gasoline at the pump. And I think there will be a greater impact, in fact, on the fuel oil they heat their homes with. So it will put a strain on the average American. There are no two ways about it.
What matters is: What should the United States do now?
Soldier: I think the United States should be much tougher with Saudi Arabia because we are going backwards to accommodate them in every way. We have looked the other way with what they did. Now it’s time to be tough. They have been tough with us. I think the president of the United States should be tough with Saudi Arabia.
What matters is: What else can the United States do in terms of assistance oil prices In the near term?
Soldier: I think without a doubt that this administration has a very bad relationship with American oil companies and energy companies. I think there should be more behind-the-scenes collaboration with the oil companies and management because you really need them now to collaborate.
I know a lot of people don’t believe in hydraulic fracturing, but maybe it’s time to do more hydraulic fracturing. Maybe it’s time to ramp up production. They can increase production elsewhere, too. I think that would be very useful.
And I think the American oil companies — and I’m not a supporter of the oil companies, please don’t misunderstand — but I think they feel that the administration basically wants to fire them.
What matters is: Do you want to add anything else?
Soldier: Some believe that OPEC’s decisions are purely economic. Some people think it is purely political. It has always been both, especially for Saudi Arabia.
It is Saudi Arabia and the United Arab Emirates that are really driving the OPEC decision. I think Americans have to understand that it’s not the other members, not Nigeria or Iran. I feel that Americans should understand who are our friends and who are not.