OPEC Cuts Oil Production: A Threat to War, Economy, and International Relations

Oil production sites

“We’re going to continue to help Saudi Arabia defend its sovereignty and territorial integrity and its people,” President Biden confidently proclaimed at the State Department in February 2021. As the Yemeni Civil War intensified, the Biden Administration was eager to assist Saudi Arabia with political resolutions. Prince Faisal bin Farhan would later respond, “The Kingdom of Saudi Arabia welcomes the United States’ commitment, expressed in President Biden’s speech today, to cooperate with the Kingdom in defending its security and territory.” However, Biden’s former goals of strengthening relations with Saudi Arabia have been annihilated and replaced with a retaliatory mindset. 

On October 5, OPEC+, the Organization of the Petroleum Exporting Countries and non-OPEC allies, held its first in-person meeting in Vienna since 2020, in which members decided to cut oil production by 2 million barrels per day. The decision is to be enacted in November 2022. OPEC+ is led by Saudi Arabia, the world’s top oil exporter, and Russia. The Kingdom made this decision due to fears of global recession and to maintain oil prices. More specifically, Crown Prince Mohammed bin Salman sought to increase oil prices in order to fund his $500 billion technological metropolis plan. According to Forbes, OPEC is responsible for 90 percent of the world’s oil reserves, and this production cut nears the 10 million barrel reduction record in 2020 during the COVID-19 pandemic. 

This decision has triggered an unhappy response from President Biden. The U.S. has experienced high gas prices these past few years due to COVID-19, refinery inactivity, and relations with Russian gas imports. This summer, gas prices began to cool down. However, OPEC’s production cut foreshadows another round of volatile prices. Accordingly, the White House plans on releasing another 10 million barrels from the Strategic Petroleum Reserve next month, according to Forbes. The SPR has already been releasing one million barrels per day, as advised by the US Treasury. According to The New York Times, this program has lowered gas prices by 40 cents per gallon. While it was set to expire by the end of October, the program will continue in order to reduce the effects of the OPEC decision. Oil prices are currently on the rise, increasing 12 cents per gallon on average over the past week (at $3.92). The significant impacts of this decision remind the U.S. to reduce reliance on foreign oil production.

Additionally, President Biden’s work to inhibit Russia’s invasion in Ukraine is threatened by OPEC’s decision to cut oil production. Production cuts serve as relief for Moscow, as the nation relies on oil exports. While China and India are disassociating themselves from Russia, this decision signifies Saudi Arabia’s support. The president plans on meeting with Congress next month to discuss the U.S.’s  relationship with the Kingdom. “I’m not going to get into what I’d consider and what I have in mind. But there will be consequences,” President Biden stated. 

Furthermore, Democrats have been calling the Biden Administration to cease relations with Saudi Arabia. Politicians such as Senator Richard Blumenthal and Representative Ro Khanna are pushing to cut arms sales to Saudi Arabia and take legal action against the cartel. Moreover, NOPEC, the No Oil Producing and Exporting Cartels Act, is a bipartisan-supported bill that would allow the U.S. to sue oil companies for cutting production and thus impacting oil prices. Although it has not been previously considered due to fears of retribution, NOPEC may be taken into account after OPEC’s decision.

  The public viewed this occurrence as a “betrayal by the White House.” Biden’s visit to Saudi Arabia over the summer provided the facade of a healthy relationship. Conversely, great tension has arisen between the U.S. and the Kingdom. This will play a significant role in midterm elections, as trust in the Biden Administration shifts. 

Saudi Arabian leaders are attempting to appease the U.S. by promising that their production will increase in December and that they may vote against Russia’s annexation of Ukrainian Provinces. Nevertheless, the distrust of democratic politicians has only grown: “Let’s be very candid about this. It’s Putin and Saudi Arabia against the United States,” Senator Richard J. Durbin claimed.

OPEC+ will hold its next meeting on December 4. Its current decision to curb production will significantly raise oil prices and send economic ripples throughout the U.S. Furthermore, President Biden’s future meetings will dictate the U.S.’s relationship with Saudi Arabia. Their current tension has raised the public’s distrust in the White House and incited democratic politicians. It will also influence the results of the midterm elections. While cutting production supports Russia, future sanctions may counteract this advantage. Oil production possesses great power in our world; it affects wars, the economy, future leadership, and the overarching dynamic of foreign affairs. 

By Sophia Tabibian

Leave a Reply