Why Saudi Arabia and OPEC can diss Biden

Washington is on fire after the OPEC+ oil cartel on October 5 decided to cut oil production in the near future. OPEC+ includes 13 OPEC member states and 11 other countries, particularly Russia. Saudi Arabia is the group’s largest energy producer and de facto leader. Russia is the group’s second largest energy producer, and Saudi Arabia appears to be responding to its bid by keeping oil markets tight and raising prices. Oil exports are the largest source of revenue for the Russian government and an important source of financing for the horrific war in Ukraine. Most of the Western world supports Ukraine, including strong sanctions aimed at strangling the Russian economy. President Biden has asked Saudi Arabia to supply more oil to stabilize energy markets amid wartime turmoil. Saudi Arabia’s accusations are the victory of Russian President Vladimir Putin and the political embarrassment of Biden ahead of the midterm elections. It also means that consumers in all countries supporting Ukraine will be paying more for gasoline and other petroleum products in the coming months. Biden didn’t explain what it was, but said there would be “the consequences of what we did with Russia.” But Saudi Arabia, like it or not, has a huge influence in the US and global energy markets, despite many countries moving to reduce the use of fossil fuels and increase renewable energy. Helima Croft, Head of Global Commodities Strategy at RBC Capital Markets, said at the Columbia University Energy Conference on Oct. “Who will sit in the free space? A handful of Gulf producers and a handful of state-owned oil companies will continue to invest heavily. That means we have to keep talking to these countries.” Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman walks during a meeting with Russian Deputy Prime Minister Aleksandr Novak at the International Economic Forum (SPIEF) in Saint Petersburg. June 16, 2022 in St. Petersburg, Russia. REUTERS/Maxim Shemetov Saudi Arabia has been an American ally for decades, but the furious Washington mogul now feels betrayed and vengeful. West Virginia’s Joe Manchin, chairman of the Democratic Senate Senate Energy and Natural Resources Committee, wrote an open letter to Biden, condemning OPEC’s move as “reckless” and demanding that the United States increase its own energy production in response to OPEC. . Democrat Bob Menendez, chair of the Senate Foreign Relations Committee, wants to “immediately freeze” all aspects of US-Saudi cooperation, including US arms sales to Saudi Arabia. The “NOPEC” bill, which gives the U.S. Department of Justice more tools to address the OPEC price hike, is getting more and more support in Congress from both parties. Continuing the story Saudi Arabia announced an unusual rebuttal on 13 October. OPEC+ production cuts were based on economy, not political support for Russia. Saudi Arabia also said that the relationship between the United States and Saudi Arabia is “a strategic relationship that serves the common good of both countries.” But production declines persist. A gradual shift away from fossil fuels Many Americans are told that the United States is the world’s largest oil and gas producer. It’s true. And I think there must be a problem with government policy if we can’t sustain domestic energy at low prices. But in most cases, the problem is not government policy. The rapidly changing nature of the global energy market and the risks that investors face if they place the wrong bets.[Follow Rick Newman on Twitter, sign up for his newsletter or sound off.]The world is moving from fossil fuels to renewables, and government policies could affect how quickly that happens. Consumers are demanding these changes as the impacts of climate change become more evident. Innovative companies like Tesla are giving consumers what they want and making billions of dollars. Many companies aim to detect and follow the sequel. Government incentives, such as the recently passed Inflation Reduction Act, will be a powerful force to draw private capital into renewable energy and accelerate the pace of innovation. Meanwhile, Patrick Pleul/Pool (REUTERS) fossil fuels are still a lucrative business, but are expected to decline over the next 20 or 30 years. We will need oil and natural gas for many years to come. But it’s getting smaller. This is a poor example for large investments that can expand supply, such as new oil wells or refineries. Energy companies have shareholder, investor and contractual obligations. In other words, you should place your capital where you can get the highest returns. Demanding by consumers or politicians does not mean producing additional energy. One of the biggest concerns for fossil fuel companies right now is the risk of “stranded assets,” large projects that could quickly lose value as the fossil fuel market depletes. In this type of environment, no one wants to invest in an asset that will become obsolete before it becomes profitable. Those countries usually have nationalized oil companies that are basically run by the government. The first place was followed by Saudi Aramco of Saudi Arabia and Rosneft of Russia. Other large producers include state oil companies in Kuwait, Iraq, Iran, Qatar, UAE, Brazil and Mexico. Although China doesn’t export much oil, there are two huge state-owned enterprises in the oil and natural gas business. State-owned energy companies don’t have to worry about shareholder returns, and sometimes they don’t even have to worry about profits. Instead, it acts as a lever for government policy and can invest in capacity expansion if it aligns with government objectives. In many cases yes. Saudi Arabia is diversifying its economy beyond energy, but earlier this year Saudi Aramco said it would increase its capital expenditures by up to $50 billion this year and a similar amount by 2025 or 2026. This could make Saudi Arabia a much more important “swing producer”. “Governments can increase or decrease production as they please. In the United States, like Aramco, high prices inflate energy companies’ profits. But oil companies are cautious about investing and production in the United States is slowly growing. Oil And nobody in the gas industry wants another boom-bust cycle driven by an oversupply that ultimately drives prices down.There is more excitement about monetizing the surging demand for renewable energy. There is a way to give Arabia some pain: Democratic Senator Chris Murphy of Connecticut said Biden could move US Patriot anti-aircraft missiles currently in Saudi Arabia to Ukraine or a NATO ally in Europe, and air-to-air missiles soon to be sold in Saudi Arabia. also wants to switch to Ukraine.. Saudi Arabia faces a militant adversary across the Persian Gulf (Iran) and can feel vulnerable without US weapons. He listed the measures: Allowing pipelines and other types of infrastructure, accelerating oil and gas leasing, and providing energy oversight to all federal agencies, but even if he does everything he does, he is concerned about the financial risk of investing in a declining industry. What can really ease America’s dependence on undemocratic countries like Saudi Arabia is a sharp reduction in fossil fuel use, more people driving electric cars, installing solar roofs, and taking efficiency measures. But the transition to renewable energy is time consuming and will face many barriers, such as the difficulty of building high-voltage transmission lines that can move power quickly across the country. While we’re still going to need energy from the dissatisfied producers with less restrictions than we do here at home, Rick Newman said at Yahoo Finance is a senior columnist at Follow @rickjnewman on Twitter and click here for business and money political news. Read the latest financial and business news from Yahoo FinanceDownload the Yahoo Finance app for Apple or AndroidFollow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn and YouTube
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