OPEC Cuts Crude Oil Production Following Biden Fist Bump

JEDDAH, SAUDI ARABIA - JULY 15: (----EDITORIAL USE ONLY â MANDATORY CREDIT - "ROYAL COURT OF SAUDI ARABIA / HANDOUT" - NO MARKETING NO ADVERTISING CAMPAIGNS - DISTRIBUTED AS A SERVICE TO CLIENTS----) US President Joe Biden (L) being welcomed by Saudi Arabian Crown Prince Mohammed bin Salman (R) at Alsalam Royal Palace in Jeddah, Saudi Arabia on July 15, 2022. (Photo by Royal Court of Saudi Arabia / Handout/Anadolu Agency via Getty Images)

Back in August, a 100,000 barrel per day increase in OPEC+ had been settled upon two weeks after Biden went groveling to the Middle East and shared a fist bump with Crown Prince Mohammed bin Salman. Biden’s trip in July to Jeddah was by far the most controversial of Biden’s disastrous presidency to date, leading human rights activists to blast him for caving on his alleged principles. Why is anyone surprised?

Biden’s op-ed in the Washington Post, where he sought to explain why his visit to the Middle East was necessary, did little to cushion the blow. The president, however, walked away with what was believed to be a commitment (and a firm fist bump) from the Saudis to boost production, even if it was a far smaller increase than he was hoping for. With the latest decision, however, even that slight increase is dead in the water until further notice. It’s more proof that Riyadh (capital of Saudi Arabia), like oil producers everywhere, makes oil policies based on its interests.

The 100,000 barrel a day decrease in the broad scope of things is not that big of a deal as it only accounts for 0.1 percent of global demand. These new quotas will come as a relief for crude oil producers, including Saudi Arabia, that has either maxed out their production capacity or are getting close to the breaking point. The decrease is insignificant, but the message sent out speaks louder. A lot louder.

These oil reductions are a reminder that the world’s traditional crude suppliers still have a large amount of leverage. Washington DC may no longer rely on the Middle East for crude oil to the extent it did in the 1990s and early 2000s, but OPEC is still the heavyweight champion in world oil markets. As long as the industry depends on crude oil to function, OPEC will continue to possess influence and use it, either to cushion member states’ budgets or to price their competitors out of the crude oil market (Aramco, the Saudi state oil giant, has tried to bankrupt US shale companies on multiple occasions). About 80 percent of the world’s proven oil reserves are in OPEC member states, and the cartel is responsible for more than half of the world’s output. Simply put, oil has been and remains a powerful commodity.

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This summer, crude oil prices plummeted further due in part to the speculation that Iran and the West could be on the cusp of reaching a nuclear agreement, which would allow Tehran to once again legally start manufacturing crude oil again, which could contribute to approximately 1 million BPD (barrels per day) to markets worldwide. This would allow for an abundance of supply and lower returns, and more competition for the Saudis.

OPEC has gotten very comfortable fetching $100 a barrel for crude oil, and it has no intention of returning to the days when supply vastly outstripped demand. So, don’t expect too much relief at the gas pump, no matter how much Bumbling Biden begs OPEC. Simply put, it would be in this country’s best interest to reopen our pipelines, and perhaps, when we have a real Commander in Chief again, we might see this happen.


Notice: This article may contain commentary that reflects the author's opinion.