Oil prices have been a point of contention since President Biden took office. With one of his first acts as President being to take away tax incentives, drilling permits, closing land to oil companies, and the death of the Keystone Pipeline, he kneecapped big oil from the start. The rest of the globe took notice of this change in American policy.
Now by thoroughly creating their own bottleneck for oil, they have given OPEC+ the keys to controlling the global price point for oil.
As a result, late on April 2nd, Saudi Arabia announced they would be cutting oil production at various OPEC+ sites in several nations across the globe, taking over 1 million barrels per day off the market starting in May. With an estimated end coming at the end of 2023, this cut is here to stay. The Saudi Kingdom set the tone with this time frame and established a 500,000 barrel per day cut in production.
In a statement, the Kingdom claimed this “is a precautionary measure aimed at supporting the stability of the oil market,” and follows a commitment they made in an October 2022 meeting, and began in November 2022.
Meanwhile, Russia’s deputy prime minister, Alexander Novak has offered up an extension of their March production cut of 500,000 barrels a day until the end of 2023 as well. In a statement, Novak said “Today, the world oil market is experiencing a period of high volatility and unpredictability due to the ongoing banking crisis in the US and Europe, global economic uncertainty, and unpredictable and shortsighted energy policy decisions. At the same time, predictability in the global oil market is a key element in ensuring energy security.”
This statement is a boldfaced decision to make when their nation is at war, already sacrificing numerous resources and being largely denied imports. A lack of oil sales and exports has already destroyed much of the Russian economy, yet the nation continues down a course that will do nothing but assure their self-destruction over the long term.
Much the same, the news has sent oil futures soaring, with May’s West Texas Intermediate crude already exceeding $80 per barrel, and Brent crude topping $85 a barrel on April 2nd. This kind of oil spike will grow significantly before May and could easily eclipse $100 a barrel as the ripples of this slash in production spreads. Respectively, these barrels were selling for $75 and $79 per barrel on March 31st.
Ole Hansen, chief commodities strategist at Saxo Bank interviewed with MarketWatch, and according to his explanation, the brunt of these cuts will be felt in the distance, and not immediately. “Remember most of the +2 m b/d increase expected for this year is backloaded into the second half with plenty of room for error should economic slowdown be as severe as currently priced in by the market through expectations of U.S. rate cuts…The Saudi oil minister love[s] to wrong-foot the market, especially when it comes to hurting speculative short sellers.”
His predictions don’t paint a pretty picture for American or global oil prices in the eyes of consumers any time soon. While early investors may be elated at this news, as Hansen pointed out, the Saudi oil minister has a propensity for kneecapping anyone short-selling his oil, and he not only has the production facilities and capabilities, but he also has the manpower and the money to make it happen.
President Biden could easily fix the problem for American oil companies and many other countries across the globe, all while helping the consumer who is dealing with rampant inflation. This move could also lower inflation at the same time.
Yet he won’t do it.
All he must do is un-do his anti-oil bills. Bring back the tax breaks and the incentives for oil producers, and quit trying to force green energy on the American consumer. Just doing this would help restore so much economic prosperity to the country. If he could get Buttigieg to do his job and not go on vacation, and maybe work on fixing the infrastructure, the country could return to greatness. Then again, doing that would make him Republican.