The White House sent two staffers to Saudi Arabia in mid-February to urge the kingdom to produce more oil. The background is fears that energy prices could rise further in the event of a Russian invasion of Ukraine. President Joe Biden had warned of such a price increase scenario...
The White House sent two staffers to Saudi Arabia in mid-February to urge the kingdom to produce more oil. The background is fears that energy prices could rise further in the event of a Russian invasion of Ukraine. President Joe Biden had warned of such a price increase scenario in a speech on 15th February.
The Saudis have resisted any unilateral changes in their oil production because of their commitments to OPEC+, a consortium of oil-producing countries that includes Russia, as acknowledged by the U.S. side.
The U.S. delegation’s trip to Saudi Arabia followed a telephone conversation on 9th February between President Biden and Saudi King Salman bin Abdulaziz Al-Saud in which they discussed “ensuring the stability of global energy supplies,” according to a White House statement. Here, the king referred to a historic April 2020 OPEC+ agreement on production cuts to stabilize price levels following pandemic-related demand losses and stressed the importance of complying with it. Saudi Arabia’s desire to ensure energy market stability in close coordination with its OPEC+ partners was also underscored by its foreign minister at the Munich Security Conference last weekend.
However, the correction requested by the United Arab Emirates (UAE) in the spring of 2021 had led to a modification of the April 2020 agreement, according to which OPEC+ will increase oil production by 400,000 bpd every month from August 2021. However, as the cartel has failed to meet these new production targets on several occasions, Fatih Birol, Executive Director of the International Energy Agency, urged closure of the production gap, now accumulated to 900,000 bpd, at a recent conference in Riyadh. UAE Energy Minister Suhail al-Mazrouei had pointed out on 14th February that tensions between Russia and the West were drivers of oil prices rather than an underlying shortage justifying accelerated production increases.
President Biden said in a speech on 15th February that a Russian invasion of Ukraine would likely not be “painless” for Americans. “There could be an impact on our energy prices,” he said. He is quoted by CNN as saying that the U.S. is taking active steps to alleviate pressure on its own energy markets and offset rising prices. In coordination with major energy consumers and producers, he said, the U.S. is prepared to use all available tools and authority to provide relief at the pump. Additional measures to protect consumers and manage the impact on prices at the pump are being worked on in cooperation with Congress, he said.
A Russian invasion of Ukraine could significantly impact global energy markets. Russia is the second-largest gas producer after the U.S. and – behind the U.S. – is one of the world’s top three oil-producing nations, along with Saudi Arabia. For the EU, Russia is by far the most important supplier of natural gas and crude oil. Much of its natural gas supply flows through Ukraine, and those exports would likely be seriously disrupted by war and damage to critical energy infrastructure.