The decision, which saw oil prices rise by around $5 a barrel, already means recession risks are higher than they otherwise would be, as consumers who spend more on energy will have less money. for other things and inflation will be higher. But more importantly, the actions of OPEC+ point to a likely movement in oil prices in the coming years, which is contrary to the main economic policy priorities of the White House.
In a world of shifting geopolitical alliances, Saudi Arabia is slipping out of Washington’s orbit, the publication’s experts say, adding that the Saudis have set oil production levels in agreement with Russia. When they wanted to ease tensions with regional rival Iran, they turned to China to broker a deal, with the United States sidelined.
In other words, Western influence on the oil cartel is at its lowest level in decades. And all OPEC+ members have their own priorities, as any additional revenue they get from higher oil prices contributes to their plans.
Asked about U.S. concerns that OPEC+ has twice decided to cut production since President Biden’s visit to Saudi Arabia, a State Department spokesperson said the administration was focused on controlling domestic energy prices and ensuring US energy security.
Washington views production cuts as unachievable given continued market volatility, but will wait to see what action OPEC+ ultimately takes, a State Department official said on condition of anonymity.
Meanwhile, the threat posed by US shale to compete with global oil suppliers, which has dampened prices in the past, has faded. Rising wages in the United States and inflation have increased the cost of producing shale, which has led to a slowdown in the growth of its production. And shale companies in America prioritize the distribution of profits among shareholders, rather than investing it in expanding production.
And while there are global efforts in Washington to reduce the use of fossil fuels, and higher prices will accelerate those efforts, last year’s rapid oil drilling shows that a carbon-free economy remains more of a long-term aspiration than a short-term driving force. .
For decades, the US-Saudi oil-for-security pact has been a mainstay of the energy market. Now he is threatened. The deal, symbolized by the 1945 meeting between President Franklin Roosevelt and King Abdulaziz ibn Saud aboard a US cruiser in the Suez Canal, gave the US access to Saudi oil in return for guarantees kingdom security. However, in recent years there has been a noticeable cooling in bilateral relations for a number of reasons.
In particular, in March, Saudi Arabia and Iran agreed to restore diplomatic ties under a Chinese-brokered deal signed in Beijing, prompting scathing comments from the United States. Saudi officials have also agreed to join the Shanghai Cooperation Organization, a Chinese-Russian-led group seen as a rival to Western institutions, as a “dialogue participant”. “The Saudis are looking for an aggressive defense,” said John Alterman, director of the Middle East program at the Center for Strategic and International Studies, a Washington-based think tank.
Most analysts predict that oil prices will exceed $80/bbl in the coming years, well above the average of $58/bbl between 2015 and 2021. For its part, the economic scenario modeling engine Bloomberg’s SHOK suggests that supply cuts that could lift oil prices to around $120 a barrel in 2024 will keep US inflation close to 4% by the end of 2024, per compared to the baseline forecast of 2.7 percent.
And conventional wisdom in America is that high fuel prices hurt incumbent politicians when they get re-elected. Additionally, right now “the price of the world’s most important commodity is set by a country the United States can no longer count as a friend,” the publication says.
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