Despite some positive steps towards friendly relations with Saudi Arabia in the past few months, OPEC’s recent decision to limit its production of oil has seemingly damaged its relationship with the United States. As of late, U.S. relationships with OPEC leader Saudi Arabia seemed to be warming with President Biden’s visit to the nation in July. Amidst the war in Ukraine, OPEC’s decision to raise the cost of crude oil appears as a reversal of this growing relationship with western countries and a sign of friendship towards Russia. Many American political leaders have released plans to punish these actions from the Middle East, causing Saudi leaders to react with their own rebukes.
OPEC, or the Organization of the Petroleum Exporting Countries, is the collective of 13 states, primarily within the Middle East as well as in Africa and South America, that each produce a large quantity of petroleum every year. These member countries together produce around 30% of the world’s crude oil with Saudi Arabia, the largest producer within the member states, producing around 10 million barrels a day. In 2016, the OPEC states joined with 10 additional oil-producing states, including Russia, to form OPEC Plus. The group primarily exists to control and decide on the amount of petroleum to sell on world markets. The recent major cut by these OPEC Plus countries was seen as unprecedented and received wide attention, cutting production by approximately two million barrels, around two percent of global daily petroleum output, to less than 42 million barrels a day. OPEC Plus countries explained in their meeting in Vienna that their decision primarily revolved around boosting the cost of oil which had fallen from its previous peak in June of this year. After this meeting, prices did rise to more than 1.5 percent, mimicking prices seen in mid-September and damaging recent achievements in U.S. oil prices.
As the midterms approach, these rising oil and gas prices may mar Democrat hopes for victories in the election cycle, provoking outrage and discussion of punitive measures aimed toward OPEC. In response to the cut, the Biden Administration announced that the Energy Department would release 10 million additional barrels of oil from the Strategic Petroleum Reserve in November, in hopes of lowering gas prices in the U.S. Some representatives have also called for action against major oil producer Saudi Arabia such as limiting arms trade with the country. A few leaders have even suggested entirely cutting ties with the nation like the Senate Foreign Relations Committee Chairman who stated that the U.S. should, “freeze all aspects of our cooperation with Saudi Arabia.” Despite these more dramatic calls for action, some question the true magnitude of the decision as OPEC member states often miss their quotas, indicating that production may not shift as drastically as some have portrayed.
Furthermore, OPEC’s actions have raised questions around whether the new cut acts as a gesture of alliance towards Russia amidst the tensions in Ukraine. Recently, the European Union has discussed setting a price cap for Russian oil, lowering the cost that Russia could sell that oil at, as a retribution for Russia’s actions in the war in Ukraine. The recent decision from OPEC Plus, in association with Russia, signals a desire to raise the price of oil, in line with the policy strategies of Russia, to push costs of oil upward for their own benefit. Notably, Alexander Novak, Russia’s deputy prime minister and subject of U.S. sanctions, co-chairs OPEC Plus alongside Prince Abdulaziz bin Salman of Saudi Arabia, indicating a further breach between the U.S. and the OPEC group. Additionally, OPEC has extended the union of OPEC Plus with these non-member states, including Russia, for another year beyond the initial expiration date in December, marking a further pathway towards collaboration between Saudi Arabia and Russia.
In response to the rebukes and calls for punishment from the West, Saudi Arabia has firmly maintained their commitment to neutrality in foreign affairs. Prince Abdulaziz of Saudi Arabia particularly took part in denying these more inflammatory claims stating that OPEC Plus operates as a, “band of brothers,” primarily serving to ensure the security of oil prices. To support his argument, he displayed data, noting that petroleum prices have only risen by a single percentage point since January, prior to the Russian invasion of Ukraine, while further remarking on the ever-climbing prices of natural gas and coal. The Prince’s data indicates that OPEC’s collaboration with Russia during the war in Ukraine has only minimally affected oil prices, contrasting with calls from the West of partiality to Russia. In a press release from Saudi Arabia, the Saudis stated that they drafted the cuts based only upon economic considerations and were not “politically motivated,” depicting broken communication between the U.S. and Saudi Arabia.
Although the recent cut has brought about insistent calls for action and estimates of damaging price adjustments, it still remains to be seen how the U.S. may react, and whether the cut will majorly affect consumers. As of now, President Biden will delay action surrounding OPEC and Saudi Arabia until after the midterm elections, allowing for further discussion as well as greater investigation into the consequences of the cuts. Relationships between Saudi Arabia and Russia will need to be tested over the next few months, revealing more accurate depictions of connections within the petroleum industry. At home, Americans will soon see the aftereffects of the cuts at the gas pump, as well as watch how the foreign affairs and policy decisions surrounding the Middle East unfold.
Photos:
https://www.nytimes.com/2022/10/05/business/opec-russia-oil-output.html
https://www.npr.org/2022/10/05/1126754169/opec-oil-production-cut
https://www.npr.org/2022/10/13/1128523146/saudi-arabia-russia-opec-oil-cut-biden-congress-washington
Sources:
https://www.npr.org/2022/10/11/1128214569/biden-us-saudi-relationship
https://www.bbc.com/news/business-61188579
https://www.npr.org/2022/10/05/1126754169/opec-oil-production-cut
https://www.nytimes.com/2022/10/05/business/opec-russia-oil-output.html
https://www.theguardian.com/business/2022/oct/05/biden-administration-angered-by-opec-oil-output-cut
https://www.npr.org/2022/10/13/1128523146/saudi-arabia-russia-opec-oil-cut-biden-congress-washington
https://www.washingtonpost.com/world/2022/10/13/saudi-opec-oil-production-biden/