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Biden Has ‘Only Bad Options’ for Bringing Down Oil Prices

by

HOUSTON — When President Biden meets Crown Prince Mohammed bin Salman in Saudi Arabia, he will be following in the footsteps of presidents like Jimmy Carter, who flew to Tehran in 1977 to exchange toasts with the shah of Iran on New Year’s Eve.

Like the prince, the shah was an unelected monarch with a tarnished human rights record. But Mr. Carter was obliged to celebrate with him for a cause that was of great concern to people back home: cheaper gasoline and secure oil supplies.

As Mr. Carter and other presidents learned, Mr. Biden has precious few tools to bring down costs at the pump, especially when Russia, one of the world’s largest energy producers, has started an unprovoked war against a smaller neighbor. In Mr. Carter’s time, oil supplies that Western countries needed were threatened by revolutions in the Middle East.

During the 2020 campaign, Mr. Biden pledged to turn Saudi Arabia into a “pariah” for the assassination of a prominent dissident, Jamal Khashoggi. But officials said last week that he planned to visit the kingdom this summer. It was just the latest sign that oil has again regained its centrality in geopolitics.

oil prices fell below zero at the start of the pandemic. Big companies like Exxon Mobil, Chevron, BP and Shell have largely stuck to the investment budgets they set last year before Russia invaded Ukraine.

The Russia-Ukraine War and the Global Economy


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A far-reaching conflict. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has caused​​ dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.

Global growth slows. The fallout from the war has hobbled efforts by major economies to recover from the pandemic, injecting new uncertainty and undermining economic confidence around the world. In the United States, gross domestic product, adjusted for inflation, fell 0.4 percent in the first quarter of 2022.

Russia’s economy faces slowdown. Though pro-Ukraine countries continue to adopt sanctions against the Kremlin in response to its aggression, the Russian economy has avoided a crippling collapse for now thanks to capital controls and interest rate increases. But Russia’s central bank chief warned that the country is likely to face a steep economic downturn as its inventory of imported goods and parts runs low.

Trade barriers go up. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid shortages and rising prices, erect new barriers to stop exports. But the restrictions are making the products more expensive and even harder to come by.

Prices of essential metals soar. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.

Energy traders have become so convinced that the supply will remain limited that the prices of the U.S. and global oil benchmarks climbed after news broke that Mr. Biden was planning to travel to Saudi Arabia. Oil prices rose to about $120 a barrel on Friday, and the national average price for a gallon of regular gasoline was $4.85 on Sunday, according to AAA, more than 20 cents higher than a week earlier and $1.80 above a year ago.

Another Biden administration effort that has appeared to fall flat is a decision to release a million barrels of oil daily from the Strategic Petroleum Reserve. Analysts said it was hard to discern any impact from those releases.

The Biden team has also been in talks with Venezuela and Iran, but progress has been halting.

The administration recently renewed a license that partly exempts Chevron from U.S. sanctions aimed at crippling the oil industry in Venezuela. In March, three administration officials traveled to Caracas to draw President Nicolás Maduro into negotiations with the political opposition.

In another softening of sanctions, Repsol of Spain and Eni of Italy could begin shipping small amounts of oil from Venezuela to Europe in a few weeks, Reuters reported on Sunday.

Venezuela, once a major exporter to the United States, has the world’s largest petroleum reserves. But its oil industry has been so crippled that it could take months or even years for the country to substantially increase exports.

With Iran, Mr. Biden is seeking to revive a 2015 nuclear accord that President Donald J. Trump pulled out of. A deal could free Iran to export more than 500,000 barrels of oil a day, easing the global supply crunch and making up for some of the barrels that Russia is not selling. Iran also has roughly 100 million barrels in storage, which could potentially be released quickly.

But the nuclear talks appear to be mired in disagreements and are not expected to bear fruit soon.

Of course, any deals with either Venezuela or Iran could themselves become political liabilities for Mr. Biden because most Republicans and even some Democrats oppose compromises with the leaders of those countries.

“No president wants to remove the Revolutionary Guards of Iran from the terrorist list,” Ben Cahill, an energy expert at the Center for Strategic and International Studies in Washington, said about one of the sticking points in the talks with Iran. “Presidents are wary of any moves that look like they are making political sacrifices and handing a win to America’s adversaries.”

Foreign-policy experts say that while energy crises during war are inevitable, they always seem to surprise administrations, which are generally unprepared for the next crisis. Mr. Bordoff, the Obama adviser, suggested that the country invest more in electric cars and trucks and encourage more efficiency and conservation to lower energy demand.

“The history of oil crises shows that when there is a crisis, politicians run around like chickens with their heads cut off, trying to figure out what they can do to provide immediate relief to consumers,” Mr. Bordoff said. U.S. leaders, he added, need to better prepare the country for “the next time there is an inevitable oil crisis.”

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Filed Under: BUSINESS Tagged With: Alaska, Barack Obama, Biden administration, Biden, Joseph R Jr, BP, Carter, Jimmy, Chevron, Chickens, Climate change, Conservation, Democrats, Economy, Embargoes and Sanctions, Energy, Europe, Exports, Federal Lands, Gas, Global economy, Government, Gross Domestic Product, History, Human rights, Industry, Inflation, International Relations, International Trade and World Market, Iran, Italy, Jamal Khashoggi, Jimmy Carter, Jobs, Mexico, Middle East, mobile, Mobile phones, Mohammed bin Salman, Mohammed bin Salman (1985- ), National, Natural Gas, Next, Oil, Oil (Petroleum) and Gasoline, Pipelines, Policy, Politics and Government, Presidents and Presidency (US), Prices (Fares, Fees and Rates), Prince, Production, Qatar, Republicans, Reuters, Russia, Russian Invasion of Ukraine (2022), Saudi Arabia, Shortages, Spain, Summer, Texas, travel, Ukraine, United States, United States International Relations, Venezuela, Washington, Wells

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