The Biden administration launched a large-scale press campaign in a last-ditch effort to dissuade allies in the Middle East from drastically cutting oil production, according to multiple sources familiar with the matter.
But that attempt appears to have failed, following Wednesday’s pivotal meeting of OPEC+, the international oil producer cartel that, as expected, announced a significant cut in production in a bid to raise oil prices. That, in turn, is likely to cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.
On Wednesday morning, OPEC+ oil ministers in Vienna agreed to an even bigger cut in production than the White House had feared — 2 million barrels a day starting in November, according to a readout from the meeting released on Wednesday. Ministers said the austerity measures were necessary “in light of the uncertainty about 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 viewed as “unnecessary.” Secretary of State Antony Blinken told reporters when asked about the move that “when it comes to OPEC, we have made our views clear to OPEC members.”
In recent days, Biden’s top energy, economics and foreign policy officials have been called in to lobby their foreign counterparts in Middle Eastern-affiliated countries, including Kuwait, Saudi Arabia and the United Arab Emirates to to vote against cutting oil production. Wednesday’s production cut is the biggest cut since the start of the pandemic and could lead to a dramatic spike in oil prices.
Some of the draft negotiating points circulated Monday to the Treasury Department by the White House and obtained by CNN labeled the prospect of a production cut as a “total disaster” and warned it could be a “hostile act.” be understood.
“It’s important that everyone is aware of how high the stakes are,” said a US official of what was perceived as a broad-based government effort expected to continue ahead of Wednesday’s OPEC+ meeting.
The White House is “cramping and panicking,” said another US official, who described the latest government effort as “taking off the gloves.” According to a White House official, the talking points were prepared and exchanged by staffers and not approved by the White House leadership or used with foreign partners.
In a statement to CNN, Adrienne Watson, spokesperson for the National Security Council, said: “We have been clear that energy supply must meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk about that. with our partners.”
For Biden, a dramatic cut in oil production couldn’t come at a worse time. The government has been engaged in an intensive domestic and foreign policy effort for months to mitigate rising energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to be paying off, with US gasoline prices falling for nearly 100 days in a row.
But with only a month to go before the crucial midterm elections, US gasoline prices are starting to rise again, posing a political risk that the White House is desperately trying to avoid. As US officials in recent weeks have begun to probe possible domestic options to avert gradual hikes, news of major OPEC+ actions poses a particularly acute challenge.
Watson, the NSC spokesperson declined to comment on the interim deadlines, saying instead, “Thanks to the efforts of the president, energy prices have fallen sharply from their peak and American consumers are paying much less at the pump.”
Amos Hochstein, Biden’s chief energy envoy, has taken a leading role in the lobbying, which has been much more extensive than previously reported, amid extreme White House concerns about the potential budget cut. Hochstein, along with top national security official Brett McGurk and government special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues following Biden’s high-profile visit to Saudi Arabia. Arabia in July. .
Officials from the government’s economic and foreign policy teams have also been involved in reaching out to OPEC governments as part of the latest effort to avert a production cut.
The White House has asked Treasury Secretary Janet Yellen to personally present the matter to some Gulf finance ministers, including Kuwait and the UAE, and convince them that a cut in production would be very damaging to the global economy. The US has argued that a long-term cut in oil production would put more downward pressure on prices – the opposite of what a significant cut should achieve. Their logic is that “cutting now would increase inflation risk,” lead to higher interest rates and ultimately a greater risk of a recession.
“There is a great political risk to your reputation and relations with the United States and the West if you make any progress,” Yellen suggested to her foreign colleagues in the draft White House talks.
A senior US official acknowledged that the government has been lobbying the Saudi Arabia-led coalition for weeks to convince them not to cut oil production.
It comes less than three months after President Joe Biden traveled to Saudi Arabia and met Crown Prince Mohammed bin Salman on a trip driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to cut oil production. which would help lower the then skyrocketing gas prices.
Biden’s meeting with Saudi crown prince comes under fire
When OPEC+ agreed to a modest production increase of 100,000 barrels a few weeks later, critics argued Biden had gotten little out of the trip.
The trip was billed as a meeting with regional leaders on issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for restoring the image of the crown prince directly blamed by Biden for orchestrating the murder of Washington Post columnist Jamal Khashoggi.
In the months leading up to the meeting, Biden’s chief aides to 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 US campaign to block production cuts as less difficult to sell, and more as an attempt to underscore a critical international moment given Ukraine’s economic fragility and ongoing war. Although another source familiar with the discussions told CNN it was described as “desperate” by a diplomat from one of the countries approached.
A source familiar with the outreach says a meeting was planned with the UAE but the attempt was rejected by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Not even Saudi Arabia. The UAE embassy declined to comment.
In public, the White House has cautiously avoided considering the possibility of a dramatic oil production cut.
“We are not members of OPEC+, so I don’t want to prejudge what might come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters on Monday. The US focus, Jean-Pierre said, continues to “take every step to ensure that markets are sufficiently supplied to meet the demand for a growing global economy.”
OPEC+ members are considering a more dramatic cut amid a sharp drop in prices, which have fallen sharply below $90 a barrel in recent months.
Hanging above Wednesday’s OPEC+ meeting in Vienna is the looming oil price ceiling that European countries plan to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not just Russia, have expressed their dismay at 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.
White House talking points with Treasury included a US proposal that if OPEC+ decides against a cut this week, the US will announce a buyback of up to 200 million barrels to replenish its Strategic Petroleum Reserve (SPR), an emergency stock. petroleum that the US has tapped this year to help lower oil prices.
The government has been making clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC oil to supplement the SPR. The idea was to convey to OPEC+ that the US “will not let them dry out” if they invest money in production, the official said, and that therefore prices will not collapse if global demand falls.