Candidate Joe Biden promised in 2019 to make Saudi Arabia a “pariah” over the kingdom’s human rights record. President Biden, confronted by economic reality, reversed himself.
With gasoline prices near record highs and inflation fears mounting, Biden visited OPEC kingpin Saudi Arabia last month. Biden even fist-bumped Saudi Crown Prince Mohammed bin Salman, who US intelligence directly linked to the murder of Washington Post journalist Jamal Khashoggi in 2018.
The President left Saudi Arabia without a public agreement from the kingdom to help out on gas prices, but White House officials expressed optimism that help was indeed on the way.
Now, it’s clear that Biden’s political gamble to make nice with MBS has not paid off in a significant way that Americans will feel at the gas pump, at least not yet.
OPEC+ announced Wednesday a deal to increase oil production, but only by a token amount of 100,000 barrels per day.
That is not nearly enough to move the needle in a world that consumes 100 million barrels of oil every single day.
“That is miniscule, almost imperceptible,” Bob McNally, president of consulting firm Rapidan Energy Group, told CNN.
For context, OPEC+ announced a larger increase of 648,000 barrels per day in late June.
This latest move amounts to the smallest increase in production on a percentage basis in OPEC history, according to analysis by McNally.
“OPEC+ did the absolute minimum. The market is interpreting this as just short of a rebuff,” he said. “It’s a purely symbolic gesture.”
Others go even further, describing the OPEC+ move as an insult given Biden’s journey to Saudi Arabia, the de facto leader of the producer group.
“It’s a slap in the face for the Biden administration. This trip, meeting with MBS, just didn’t work,” Matt Smith, lead oil analyst Americas at Kpler, told CNN.
Robert Yawger, vice president of energy futures at Mizuho Securities, similarly described the OPEC+ decision as a “slap in the face.”
“I must say I am surprised they only threw in 100,000 barrels per day,” Yawger said.
‘Step in the right direction,’ White House says
Oil prices initially rallied on the OPEC+ news, relieved the producer group didn’t act more aggressively. However, oil later reversed course after new government statistics showed an unexpected jump in inventories, renewing concerns about weakening demand.
Even the White House conceded the OPEC+ decision will not significantly affect the price of gasoline for Americans.
“Well, no it doesn’t,” White House senior energy adviser for energy security Amos Hochstein said when asked by CNN’s Jim Sciutto whether the move will have a major effect.
By contrast, on July 19 Hochstein told CNN he was “pretty confident” that OPEC+ would move to raise production “as a result of the president’s conversations.”
Hochstein described Wednesday’s move as a “step in the right direction,” but declined to say if Biden was disappointed the increase wasn’t bigger.
Recession jitters
Of course, there may be legitimate reasons why OPEC+ decided not to heed Biden’s call to ramp up production.
Recession fears have swirled in recent weeks, raising concern in the oil market about weakening demand for energy. US oil prices closed on Monday at their weakest point in five months, taking pressure off OPEC+ to step up with a big production increase.
After racing above $5 a gallon in June for the first time, gasoline prices have also cooled off considerably. The national average for regular gasoline dropped to $4.16 a gallon on Wednesday, marking 50 consecutive days of falling prices, according to AAA.
There is also growing doubt in the oil market about how much firepower OPEC+ truly has to increase production, even if it wanted to.
The producer group has consistently undershot its own production targets, raising question about how much spare capacity remains outside of Saudi Arabia and the United Arab Emirates.
OPEC+ hinted at this issue in its statement on Wednesday, saying the “severely limited availability of excess capacity necessitates utilizing it with great caution in response to severe supply disruptions.”
“I suspect they don’t have the barrels to increase,” said Mizuho’s Yawger.
No matter the reason behind OPEC+’s miniscule production hike, it’s hard to imagine Biden got what he wanted when he reluctantly agreed to sit down with MBS.