We were few and the grandmother gave birth, who says folk wisdom. It turns out that in the midst of the energy crisis caused by the Russian invasion of Ukraine, which has put water around our necks with inflation and the prices of electricity and transport, a group of countries known as OPEC+, led by Russia and Saudi Arabia , has decided to reduce its oil production by two million barrels per day (2% of the total) in order, they say, to get ahead of the recession that awaits us all next year.
That Russia does it is normal. It lives off its oil and gas exports, which have been hit hard by the sanctions it suffers as a result of its disastrous (I dare not write sloppy, but I really want it) invasion of Ukraine. It is normal because Russia already will not be able to export 77% of its gas and 40% of its oil to us (41% and 25% of our imports, respectively) and it will not be easy to find alternative customers that absorb so much energy, even though India and especially China are taking the opportunity to brazenly increase their purchases, forcing significant price reductions. Now there will be less oil on the market and Russia will be able to sell its more expensiveand with that money it will finance the enormous military effort that – with little success to date – it is making in Ukraine. This rise is also of great interest to the Ayatollahs of Iranthat with so many protests (strongly repressed) after the death of Masha AminThey need some good news to give to their suffering population, like water in May, and many other smaller producers are also interested, who saw with growing concern how prices were falling from the highs of last August (120 dollars/barrel) to 80 a few days ago and many of them – like Algeria, without going any further – need it at 90 dollars to balance their accounts.
What is less explained is that Saudi Arabia and the United Arab Emirates have happily joined the party, because although the rise also benefits them, they are among Washington’s main allies in the Middle East and among its biggest gun buyersincluding the most modern F-35 aircraft on the market, weapons that have been used in the war in Yemen.
So what happened is a real slap in the face for President Biden, who, biting his heart, traveled to Riyadh in July to ask Mohamed bin Salmán (MbS) to increase production to compensate for the exit of Russian oil from the market and because the rise in the price of gasoline hurts the American Democrats more than anything in the hard-fought Mid-Term elections in November, in which nothing less is at stake than keeping (or losing) the House of Representatives and the Senate. There are a lot of nerves in Washington these days and Biden has already announced measures against Riyadh…
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I say that Biden bite the bullet because it must have been hard for him to go see the Saudi prince, whom he called a “pariah” a year ago; international for considering him responsible for the brutal dismemberment of journalist Jamal Kashoggi in Istanbul, which according to its intelligence services is something that no one would have dared to do without orders from very high up. And now MbS leaves you in the lurch, not only not increasing but reducing your oil production, and that shows better than anything that America is no longer what it was in the Middle East. His objectives there were three: to get oil in quantity and at a convenient price and now the US is self-sufficient thanks to ‘fracking’; protect Israel, which now protects itself very well; and, thirdly, to prevent Russia from entering the Middle East, which is something that Washington has not achieved because it cuts the cod in Syria. The vacuum caused in the region by his withdrawal is being covered by Russia, Iran and Turkey and the countries of the area take note looking for other allies, such as Russia and China. How could it be less. The current cut in oil production is but its consequence.
For us the news is bad because predicts increases for companies, heating and gas stations and thus contributes to the difficult autumn/winter that awaits us.