The Organization of the Petroleum Exporting Countries announced Wednesday that it will be cutting oil production, directly thwarting the Biden administration’s measures to pressure Middle Eastern oil companies to continue normal production to help combat high gas prices.
In anticipation of OPEC+’s important Wednesday meeting, Biden administration officials tried to persuade officials in member countries such as Kuwait, the United Arab Emirates and Saudi Arabia to vote against any decision to cut oil production, since that not only would help Russian oil exports but also would spike American gas prices just ahead of the midterm elections, CNN reported.
But despite the administration’s efforts, OPEC+ announced it would cut oil production by 2 million barrels per day starting in November.
The organization said it made the move in “light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive, and preemptive.”
One U.S. official told CNN that the White House is “having a spasm and panicking” over the announcement. The report said draft talking points provided to Treasury Department labeled the prospect of a production cut as a “total disaster” and perhaps even a “hostile act.”
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“It’s important everyone is aware of just how high the stakes are,” one U.S. official told CNN.
This is the biggest cutback that OPEC+ has imposed on its production since April 2020, when the pandemic rocked the global economy and disrupted the oil market, The Wall Street Journal reported.
In the past four months, oil prices were just beginning to fall again after skyrocketing at the beginning of the year due, in part, to Russia’s invasion of Ukraine.
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Brent crude, the international benchmark for oil prices, had dropped to $83 per barrel for the first time since the start of the year, according to the report.
But with OPEC+’s decision, the price had already jumped back up over $93 a barrel on Wednesday, according to OilPrice.com.
The administration announced it would respond to the OPEC+ move by withdrawing another 10 million barrels from the Strategic Petroleum Reserve next month.
The US oil piggy bank is half empty… OPEC+ today announced cutting oil supply by 2mb per day…
Making Biden’s release of 1mb per day look increasingly futile… and unsustainable as the SPR is getting depleted to dangerously low levels… pic.twitter.com/1PSG1nkxRO
— Wall Street Silver (@WallStreetSilv) October 5, 2022
The statement Wednesday from National Security Advisor Jake Sullivan and National Economic Council Director Brian Deese said President Joe Biden was “disappointed by the shortsighted decision by OPEC+ to cut production quotas.”
“In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” it said.
Not only does the OPEC+ decision mean higher gas prices for Americans, which is a very damaging development for Democrats and the White House ahead of next month’s elections, but it also is being seen as a serious snub from the Middle East to the U.S. and the West.
With a visit to Saudi Arabia, Biden tried to patch up the American relationships in the region just three months ago, but Wednesday’s move shows that Saudi Arabia and the rest of the region are more willing to play with Russia than with the West, according to the Wall Street Journal.
The OPEC+ production cut will benefit Moscow, whose oil production lost about a million barrels per day after the invasion of Ukraine, by limiting its loss of market share.
