Some Americans seem to be more enthusiastic about punishing Riyadh for its participation in voting for the decrease of oil production than they had been eager to sanction Russia for its invasion of Ukraine.
As disagreements over oil prices have been a constant and recurring problem (since they reflect a dispute between the consumer and the producer), the politicization of the recent disagreement – driven by Riyadh’s critics – will instead harm the high interests of both Saudi Arabia and the US.
It is worth mentioning that besides Saudi Arabia and the UAE, OPEC countries were unanimously in favor of reducing oil production, as they hoped that this procedure might prevent oil prices from a catastrophic fall since just two years earlier, it sold it at $40 per barrel. A recurrence of this scenario would be destructive to the oil-producing countries, as the high oil prices are disastrous to consuming nations.
Meanwhile, apart from their recent dispute over oil prices, Riyadh and Washington share a large group of equally significant vital common interests that make one think it highly unlikely for the efforts to ruin their bilateral relations to succeed.
For one thing, Saudi Arabia is confronting Iranian coup-mongers in Yemen, which serves US interests and deprives Teheran, and its affiliated Hezbollah is dominating maritime routes that pass through the Red Sea and Bab al-Mandab Strait, reaching East Africa.
Another common interest for the US and Saudi Arabia is to confront Iran in the Gulf region, especially since Washington considers Iran a threat to its interests and to the security of its allies, which include other countries besides Saudi Arabia.
Previously, Iran had threatened to close the Strait of Hormuz. In the same vein, it had targeted Saudi oil facilities and expanded the scope of its maritime military activities to threaten oil tankers. Such actions by Iran affect oil prices much more than an OPEC meeting in Vienna. A lack of US-Saudi military cooperation might make one oil barrel cost $200 instead of $90.
Another issue worth discussing is Washington’s stoppage of its military cooperation with Riyadh, which US officials have repeatedly denied. If such a thing happens, it will push Saudi Arabia and other countries towards China and Russia. It is unimaginable to see the US abandon its precious allies to its enemies just because of an oil price dispute, particularly as Washington prepares for the new phase of the Cold War.
The setting of oil production shares is a continuous process for long decades, and it should never be interpreted as an act directed against the Biden administration. Instead, it is an issue purely related to barrel prices deemed fit by each oil-producing country. The US itself is also the largest oil-producing country globally and can produce more.
The exaggerated comments and statements in Washington are partially a blame game in an electoral context. We see the Republicans making fun of the Biden administration as incapable of deterring OPEC countries from their decision. In contrast, their Democrat opponents are calling for taking revenge on Riyadh.
In a Bloomberg article, Bobby Ghosh opined that strategic interests are much more important than an oil price dispute, calling on the hawks and doves of Washington with their “fluffy feathers” to calm down.
In the same vein, the US was not surprised by OPEC’s recent decision, and Saudi Arabia had said earlier that it would halt the drop in oil prices, which reached $85 per barrel. One should also recall that the price reached $123 last year.
To sum up, without reducing oil production, its price will drop until it threatens the economies of oil-producing countries.
Another accusation raised by Riyadh’s critics is that the recent oil price reduction benefits Russia. Here one should recall that the situation is quite complicated, as when Riyadh once increased its production, Russia considered it an act directed against it since that rise coincided with a demand by the West to world countries to stop buying Russian oil.
At any rate, Riyadh’s rise in its oil production was not directed against Russia. Just as its reduction, today is not directed against the US. A price rise above $100 per barrel is as unreasonable as its reduction to $70 per barrel.
Similarly, the OPEC Plus announcement of a two-million-barrel reduction (maximum) might not happen since a few of these countries fulfil their promises. Accordingly, this exaggerated US reaction to the proposed removal of oil production is a reason for spreading panic and raising the prices rather than the reduction act.
For its part, the Biden administration, performing the role of Saudi Arabia’s victim, is a cunning player that uses all its cards to reduce prices. It is evident in how the US exempted Venezuela from the sanctions. It is encouraging it to raise its production, meanwhile allowing US companies to produce more shale oil, knowing that Washington has a strategic oil reserve that can flood the market when the right moment comes.
The Biden administration probably wishes to perform the hero role ahead of the elections if it successfully forces the oil market to reduce its price.
Regarding threats with the NOPEC bill, one should recall that Riyadh has been having a strained relationship with Washington due to the rivalry between the Republicans and Democrats. Hence, if Riyadh produces more oil, it might be penalized under the pretext that fossil fuel pollutes the environment, and if it reduces it, it might be sanctioned for an alleged oil monopoly.
Thus, the revival of the NOPEC bill would add to the confusion in the oil markets, and President Joe Biden has been fully aware of the details of that bill since he proposed it in 2007. He is the one capable of repairing the ties with Riyadh once he decides to.
