The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from drastically cutting oil production, according to multiple sources familiar with the matter.
But that effort appears to have failed, following Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers which, as expected, announced a significant cut in production in a bid to boost oil prices. oil. This will likely drive up US gas prices at a precarious time for the Biden administration, just five weeks before the midterm elections.
On Wednesday morning, OPEC+ oil ministers meeting in Vienna agreed to an even bigger production cut than the White House feared – 2 million barrels a day, starting in November, according to an account. minutes of the meeting published on Wednesday. Ministers said the cuts were necessary “in light of the uncertainty surrounding the outlook for the global economy and the oil market”.
President Joe Biden told CNN’s Arlette Saenz on Wednesday that he was “concerned” about the cuts, which he considered “unnecessary.” Asked about the move, Secretary of State Antony Blinken told reporters that “as far as OPEC is concerned, we have made our views clear to OPEC members.”
Over the past few days, Biden’s top energy, economic and foreign policy officials have been enlisted to lobby their foreign counterparts in Middle Eastern allies, including Kuwait, Saudi Arabia and the Emirates. Arab States to vote against cutting oil production. Wednesday’s production cut represents the biggest cut since the start of the pandemic and could lead to a dramatic spike in oil prices.
Some of the draft talking points released by the White House to the Treasury Department on Monday and obtained by CNN presented the prospect of a production cut as “utter disaster” and warned that it could be seen as a ” hostile act”.
“It’s important for everyone to be aware of the magnitude of the stakes,” a U.S. official said of what was billed as a broad administrative effort that is expected to continue ahead of Wednesday’s OPEC+ meeting.
The White House is “spasming and panicking,” another US official said, describing this latest effort by the administration as “taking off the gloves.” According to a White House official, the talking points were written and exchanged by staff members and not endorsed by White House leaders or used with foreign partners.
In a statement to CNN, National Security Council spokeswoman Adrienne Watson said, “We have made it clear that energy supply should meet demand to support economic growth and lower prices for consumers. around the world and we will continue to talk about it with our partners. ”
For Biden, a dramatic cut in oil production couldn’t come at a worse time. The administration has been engaged for months in an intensive domestic and foreign policy effort to mitigate the spike in energy prices following Russia’s invasion of Ukraine. That work appeared to pay off, with U.S. gasoline prices falling for nearly 100 days in a row.
But with just a month to go until a critical midterm election, gasoline prices in the United States have started to climb again, posing a political risk the White House is desperately trying to avoid. As U.S. officials have moved to assess potential domestic options to avoid incremental increases in recent weeks, news of major OPEC+ action presents a particularly acute challenge.
Watson, the NSC spokesman declined to comment on the mid-terms, saying instead, “Thanks to the President’s efforts, energy prices are down sharply from their highs and American consumers are paying significantly less. at the pump”.
Amos Hochstein, Biden’s top energy envoy, has played a leading role in the lobbying effort, which has been far more extensive than previously announced amid extreme concern in the House. Blanche regarding the potential reduction. Hochstein, along with senior national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, visited Jeddah late last month to discuss a range of energy and security issues. as part of the follow-up to Biden’s high-profile visit to Saudi Arabia in July. .
Officials from the administration’s economic and foreign policy teams have also been involved in reaching out to OPEC governments as part of the latest efforts to avoid a production cut.
The White House has asked Treasury Secretary Janet Yellen to personally make the case to select finance ministers from the Gulf states, including Kuwait and the United Arab Emirates, and try to convince them that a reduction in the production would be extremely detrimental to the global economy. The United States argued that in the long term, a cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would be supposed to accomplish. Their logic is that “cutting now would increase inflation risks”, lead to higher interest rates and ultimately a greater risk of recession.
“There is a great political risk to your reputation and your relationship with the United States and the West if you move forward,” Yellen suggested to brief his foreign counterparts on draft White House talking points.
A senior U.S. official has acknowledged that the administration lobbied the Saudi-led coalition for weeks to try to convince it not to cut oil production.
Wednesday’s production cut comes less than three months after President Joe Biden visited Saudi Arabia and met Crown Prince Mohammad bin Salman on a trip motivated in part by a desire to convince Saudi Saudi Arabia, the de facto leader of OPEC, to raise oil. production that would help bring down then skyrocketing gasoline prices.
Biden’s meeting with the Saudi crown prince is criticized
When OPEC+ agreed to a modest 100,000-barrel production increase a few weeks later, critics argued Biden got little in return.
The trip was billed as a meeting with regional leaders on issues critical to US national security, including Iran, Israel and Yemen. He has been criticized for his lack of results and for restoring the image of the crown prince who had been directly accused by Biden of orchestrating the murder of Washington Post columnist Jamal Khashoggi.
In the months leading up to the meeting, Biden’s top aides for the Middle East and energy, McGurk and Hochstein, shuttled between Washington and Saudi Arabia to plan and coordinate the visit.
A diplomatic official in the region described the U.S. campaign to block production cuts as less of a sell and more of an effort to highlight a critical international moment given economic fragility and the ongoing war in Ukraine. Although another source familiar with the talks told CNN they were described by a diplomat from one of the countries approached as “desperate”.
A source close to outreach said a call was planned with the United Arab Emirates, but the effort was rebuffed by Kuwait. The Kuwaiti Embassy in Washington did not immediately respond to a request for comment. Neither is Saudi Arabia. The UAE embassy declined to comment.
Publicly, the White House has carefully avoided weighing in on the possibility of a dramatic cut in oil production.
“We are not members of OPEC+, so I don’t want to preempt what could potentially come out of this meeting,” White House press secretary Karine Jean-Pierre told reporters on Monday. The American focus, Jean-Pierre said, remains “to take all necessary steps to ensure markets are sufficiently supplied to meet the demands of a growing global economy.”
OPEC+ members are eyeing a more dramatic drop due to what has been a precipitous decline in prices, which have fallen sharply to below $90 a barrel in recent months.
Wednesday’s OPEC+ meeting in Vienna will also be suspended from the oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. . Many OPEC+ members, not just Russia, have expressed dissatisfaction with the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.
The White House Treasury talking points included a US proposal that if OPEC+ decides not to cut this week, the US will announce a buyback of up to 200 million barrels to fill its strategic oil reserve ( SPR), an emergency oil stockpile that the United States has tapped into this year to help drive down oil prices.
The administration has made it clear to OPEC+ for months, the senior US official said, that the United States is ready to buy OPEC oil to replenish the SPR. The idea was to make it clear to OPEC+ that the United States “won’t leave it hanging” if it puts money into production, the official said, and therefore that prices will not will not collapse if global demand declines.