• Zac Hills

OPEC output cuts: Saudi Arabia holds the World at gunpoint

By ZAC HILLS

King Salman and a then Vice-President Joe Biden in 2011


On Wednesday 5th October, OPEC+ – a cartel of Petrostates headed by Saudi Arabia – announced a reduction in oil production targets of two million barrels per day, around two percent of daily global oil consumption, following recent oil price declines. In the spring, markets wobbled as oil’s value reached dramatic heights (one Brent Crude oil barrel was valued at $130) in response to the Russian invasion of Ukraine and the ensuing sanctions against the Putin regime. This panic fuelled rates of inflation that threaten the West with a significant recession. By late September, the price had waned to $84.06 a barrel. That upset major oil producers, who subsequently took their opportunities as Russo-American relations reached their nadir. Prices have now risen once again in the US as Europe is potentially close to enforcing a price cap on Russian oil.


In response, the United States has broken with tradition and directed blame on the Saudis. Despite a decades-long alliance over oil and against communism, and America’s feigned blindness to Riyadh’s egregious human rights abuses, King Salman seems to believe that America is more reliant on OPEC for energy than Riyadh is dependent on American security. Through this, President Joe Biden has the power to bring them to submission.


For Democrats in power, the problem of the oil market has an electoral dimension. America is unique in its obsessive politicisation of oil. It brought about President Jimmy Carter’s demise in 1980; and Biden’s reputation has already suffered significantly. One subsequent cultural phenomenon has been “I Did That!” stickers depicting Biden’s image placed at nationwide gas stations as humorous agitprop against rising fuel prices. In this lies a seemingly irreconcilable paradox: too much action could exacerbate economic problems and persuade voters to seek an alternative; but too little action, and the Republicans could ascend to power through fuel-focused populism. A response of some kind is urgent.


The lack of a quick or easy response to repair Western fuel scarcity is worrisome. The most fleshed-out strategy for this so far is NOPEC, which seeks to revoke OPEC’s sovereign immunity from domestic antitrust legislation, potentially leading to the cartel’s members being brought to American courts for anti-competitive practices. Despite having been crushed in Congress by the oil lobby’s intrigues before, the bill is now being reconsidered by the Democratic Senate Majority Leader Chuck Schumer following OPEC’s decision. This has some bipartisan support, with the Republican Senator Chuck Grassley being a proponent, but its risks are numerous. America could face lawsuits over market manipulation regarding agriculture because of such legislation, and judicial pursuits could push OPEC towards overproduction, hammering the costly-to-run American oil industry.


Other responses also share these weaknesses. The United States could restrict arms sales to Saudi Arabia, call for an end to the Yemen embargo, and seek an end to the conflict through a UN Security Council-mediated agreement. As Saudi Arabia was engaged in an oil price war with Russia just two years ago, their nascent tacit alliance is too frail for Riyadh to afford to lose their most consistent militaristic and strategic ally in America. The US could also attempt to divide OPEC by enticing adversaries like Venezuela with closer relations to Washington. Yet Washington has burnt every bridge with the regime since the 2019 presidential crisis. Not only has this failed to oust President Nicolas Maduro, but it starkly symbolises the barefaced hypocrisy in American foreign policymaking. The long shadow of paranoid and militant anti-communism has meant Washington can ignore uncomfortable truths about Saudi Arabia; whilst Venezuela’s comparatively less severe (although no less unacceptable) authoritarianism is held up as the pinnacle of malevolence. Such aloofness and imprudence sets America at an alarming disadvantage in sound policymaking.


A Green New Deal could be implemented, entailing a dramatic transformation of state capacity to wean the US onto domestic, greener energy sources. But, like all other policy ideas mentioned, this would face possibly insurmountable challenges. The profound weight of those whom Franklin D. Roosevelt once called the “old enemies of peace” – speculators, defence contractors, fossil-fuel lobbyists and the Cold War relics-in-suits still haunting the offices of the State Department – could pose fundamental risks to an administration seeking to adapt to a changing world order. Despite being potent solutions to threats from both Moscow and Riyadh, they all risk dividing America’s establishment and therefore must be pursued with caution; for otherwise they will be strangled at birth.


In these internal and external threats, the West begins to feel the reverberations of neoliberal globalisation. The survival of domestic oil and defence sectors in Riyadh, coupled with Europe’s years of energy dependency on unreliable, demagogic Petrostates, is the culmination of decades of poor policymaking – for which governments and citizens alike must now finally pay the price for. The difficulty of a smooth response to such a profound question of national security must remind the West of the catastrophic subordination of accountable national authority to self-motivated transnational and financial forces. The Democrats will struggle to find an answer to this, likely attempting to be radical in rhetoric and hoping their actions are not as asinine enough for voters to trust Republicans instead in future elections. But the obstacle presented is likely now too embedded to be effectively countered.



Image: Flickr / sacmclubs


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