Will Biden Benefit From His Trip to Saudi Arabia?

President Joe Biden exits the White House and walks to Marine One on the South Lawn, in Washington, on May 11, 2022. (Drew Angerer/Getty Images)

News Analysis

Crude futures slumped by as much as 5 percent on July 14 in hopes that U.S. President Joe Biden could encourage Saudi Arabia to produce more oil.

Biden will meet with Saudi leaders, including Mohammed bin Salman Al Saud. He wrote in a recent op-ed in The Washington Post that his much-anticipated visit will cover a broad array of subjects, including security in the region, energy, and an effort to “reorient—but not rupture—relations.” But the president stopped short of saying if he would address the murder of journalist Jamal Khashoggi at the Saudi Embassy in Turkey.

While industry observers noted that Riyadh doesn’t possess the additional capacity to expand output, the president might convince the kingdom to inject enough crude into the global markets to help ease the global imbalance.

White House national security adviser Jake Sullivan told reporters on July 11 that Biden would nudge more production from the Organization of the Petroleum Exporting Countries (OPEC) nations to lower gasoline prices.

“We will convey our general view ... that we believe that there needs to be adequate supply in the global market to protect the global economy and to protect the American consumer at the pump,” Sullivan said during a briefing with the press.

Last month, French President Emmanuel Macron revealed to Biden that Saudi Arabia and the United Arab Emirates (UAE) were already pumping near their limits, with the Saudis only able to add approximately 150,000 barrels per day (bpd).

However, domestic oil producers are upset by the president’s trip to the Middle East. Rather than meeting with questionable regimes and depending on foreign oil to keep the nation’s lights on, “there’s a solution beneath our feet,” according to Mike Sommers, American Petroleum Institute president and CEO.

Pump jacks operate at sunset in an oil field in Midland, Texas, on Aug. 22, 2018. (Nick Oxford/Reuters)

Biden will meet with Saudi officials to discuss the possibility of OPEC increasing production, Sommers told reporters during a July 14 conference call.

“Saudi Arabia plays a key role in the global oil market and maintaining a constructive dialogue between our two nations is important. But if the administration is serious about increasing supply, they should be meeting with producers here at home instead of looking to governments overseas,” he said.

In a video released on July 14, the API invited Biden to see the various U.S. energy sites, “from the fields of New Mexico and Plains of North Dakota to the mountains of Pennsylvania and bayous of Louisiana.”

“This administration’s misguided policy agenda—shifting away from domestic oil and natural gas—has compounded the inflationary pressures and added headwinds,” Sommers said.

Since the start of the Biden administration, the U.S. government has canceled the Keystone XL pipeline and ended, reduced, or paused permitting and leasing on federal lands and waters.

Some experts have been skeptical that the meeting with Saudi officials will amount to anything substantive.

“If Biden asks for increased oil production during his trip to Saudi Arabia, he is unlikely to be successful,” Samantha Gross, a fellow and director of the energy security and climate initiative at the Brookings Institute, wrote in a recent report. “Saudi Arabia and the United Arab Emirates are the only countries with spare capacity today. However, that capacity is believed to be limited, and they have no motivation to increase production.”

But Harley Lippman, a geopolitical analyst who helped broker the Abraham Accords deal, believes it’s a crucial meeting that will result in substantial actions and announcements. Although crude oil might have been the catalyst by the White House, enhancing relations with Saudi Arabia on fundamental issues might be of chief importance, he said.

“It’s really important for us to have them on our side, especially with someone like MBS, who is a reformer and who has a more liberal interpretation of Islam,” Lippman, CEO and founder of Genesis 10, a professional technology services firm, told The Epoch Times.

Should Saudi Arabia acquiesce to the White House’s request to turn on the taps, it wouldn’t be a one-sided affair. According to Lippman, Saudi Arabia has been under consistent attack, and the country’s leadership feels threatened by Yemen, Iran, and Turkey.

“I think Saudi Arabia is looking to the U.S. to show leadership and to protect them as a friend and an ally,” he said.

A Glance at the State of Global Energy Markets

OPEC published its latest forecast on July 12, predicting that international oil demand would climb to levels the energy cartel would struggle to satisfy.

According to its first estimates for 2023, OPEC believes average demand will increase by 2.7 million bpd to 103 million bpd, buoyed by expanding economic activity in China and India. But output by OPEC allies, OPEC+, is only predicted to rise by 1.7 million bpd. As a result, the 13-member cartel, including Saudi Arabia, would need to grow production by more than 30 million bpd throughout next year.

Despite Middle East suppliers forecasting a tighter energy market, the Paris-based International Energy Agency (IEA) slashed its demand forecast, with the group stating that high fuel prices will weigh on consumption volumes.

New numbers from the IEA’s Oil Market Report (OMR) show that international crude demand is projected to increase by 1.7 million bpd this year, down from its 1.8 million bpd estimate in June.

Phil Flynn, author of The Energy Report, echoed Chevron CEO Mike Wirth’s sentiments that the risks in the energy market are tilted to the upside.

“We believe that we’re going through a process right now of adjustment and that supplies will be tight,” he wrote. “Even if demand continues to deteriorate, the demand growth numbers by the OPEC cartel are much stronger than those by the International Energy Agency and let’s face it OPEC has a much better track record in predicting demand than the International Energy Agency.”

Some analysts argue that this meeting is superfluous because of the considerable weakness in worldwide energy markets.

West Texas Intermediate (WTI) crude prices have declined by more than 20 percent over the past month, helping the cost of a gallon of gasoline come down by close to 8 percent.

Ahead of Biden’s trip to Riyadh, oil prices have weakened primarily on recession fears and lower demand outlooks, market experts note. U.S. supplies have been steadily growing.

The latest Energy Information Administration storage report found that crude inventories increased by 3.254 million barrels in the week ending on July 8, topping the market forecast of a drop of 154,000 barrels. Gasoline stocks also rose by 5.825 million barrels, while distillate supplies climbed by 2.668 million barrels.

It was recently reported by Bloomberg that Russia is attempting to take control of international oil pricing by establishing its own crude benchmark. It’s no secret that Moscow has tried this for years, but in today’s geopolitical and energy market turmoil, this plan could accelerate, analysts say.

Lippman doubts Russia will be successful, but the Eastern European energy powerhouse is “very creative and smart, and they’re trying to think of ways to gain leverage in as strong a position as possible.”