US-Saudi oil pact breaking down as Russia grabs upper hand

[ad_1]

DUBAI: Just three years ago, when the Organisation of the Petroleum Exporting Countries and its allies (Opec+) oil giants fell out, the United States found itself playing the role of peacemaker.

Now it looks more like their target.

The Saudi-Russia oil alliance has the potential to cause all kinds of trouble for the US economy – and even for president Joe Biden’s re-election campaign.

This month’s Opec+ decision to cut crude output, for the second time since Biden flew to Saudi Arabia last summer seeking an increase, may be just the start.

That April 2 announcement, which lifted oil prices by about US$5 (RM22) a barrel, already means recession risks are bigger than they otherwise would have been –because consumers spending more on energy will have less cash left for other stuff – and inflation will be higher.

Russian president Vladimir Putin, meanwhile, gets a bigger war-chest to fund his attack on Ukraine.

But more significant is what the Opec+ move says about the likely path of oil prices over the coming years.

In a world of shifting geopolitical alliances, Saudi Arabia is breaking away from Washington’s orbit.

The Saudis set oil production levels in coordination with Russia. When they wanted to ease tensions with regional rival Iran, they turned to China to broker a deal – with the United States left out of the loop.

Western influence over the oil cartel, in other words, is at its lowest point in decades.

And the Opec+ members all have priorities of their own, from Saudi Crown Prince Mohammed Bin Salman’s ambitious plans to reinvent his economy, to Putin’s war. Any extra revenue they get from charging more for oil is a help.

Asked about US concerns that Opec+ has twice elected to cut production since president Biden’s visit to Saudi Arabia, a State Department spokesperson said the administration is focused on holding down domestic energy prices and ensuring US energy security. — Bloomberg



[ad_2]

Source link