Biden has a big oil problem. This is what you need to know about OPEC+’s decision to cut crude oil production

() — With just weeks to go before the November midterm elections, four letters are haunting President Joe Biden and the Democrats: OPEC.

Last week, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said they will cut oil production by 2 million barrels a day, the biggest cut since the start of the pandemic. in a move that threatens to drive up gasoline prices just weeks before the US midterm elections.

The group announced the production cut after its first in-person meeting since March 2020. The reduction is equivalent to about 2% of global oil demand.

The administration of President Joe Biden criticized the decision in a statement, calling it “short-sighted” and saying it is harmful to some countries already struggling with high energy prices.

Production cuts will begin in November. OPEC+, which combines OPEC countries and allies such as Russia, will meet again in December this year.

And now that?

For perspective on the OPEC+ decision and a better understanding of how it affects the entire world, we turned to Hossein Askari, who teaches international business at George Washington University.

: Can you explain us this recent OPEC decision? What exactly is happening?

Askari: When the war in Ukraine started, I’m sorry to tell your audience, the United States was not very well prepared for what it was going to do. He sanctioned Russia for this and for that. And then the price of oil started to rise. And at the same time, the United States actually imposed sanctions on Russian oil, not gas, oil. And so there was less Russian oil on Western markets.

In fact, Russia began to sell its oil more and more to China and India, and to reduce its prices to those countries. So they would buy Russian oil, but there was a shortage of oil.

Another reason the shortage had developed was that the United States basically sanctioned like a mad cowboy, if I may say so. It has sanctioned Venezuela for many years.

But Saudi Arabia, with the new effective ruler known as MBS (Mohamed bin Salman), has grown fond of Putin. So when President Biden went and saw you a few months ago and asked you to increase oil production, I’m sorry to say this, I have to include this part of the policy, I think the United States really embarrassed itself by doing that.

Of course, MBS did not respond positively. But now, in fact, it has crossed the line. He has agreed within OPEC, and of course he is OPEC’s main spokesman with Russia, that they will make cuts.

: What does OPEC’s decision mean for the average American?

Askari: From where we are now, crude oil prices by the end of the year will, I guess, be up $5 a barrel at the most. Now, a lot of people think they’re going to go higher than that. I don’t think so, because I think the world economy is going to grow less and I think we are going to see some Venezuelan oil on the market, and I think we can see some agreements so that there can be more Iranian oil on the market.

For gasoline, I think Americans can see prices perhaps rising from where they are today, if nothing else happens, by another 30 to 50 cents a gallon.

However, there is also another issue for Americans which is home heating oil, and that too may increase. So, for the average American, they’re going to pay, no matter what, a little more per gallon of gas at gas stations. And I think there’s going to be a bigger impact, actually, on the fuel that they heat their homes with. So he’s going to put pressure on the average American. There are no two ways to do it.

: What should the United States do now with the issue of oil?

Askari: I think the United States should be much, much tougher on Saudi Arabia because we have gone to great lengths to accommodate them in every way. And we have looked the other way with what they have done. And now is the time to be tough. They have been tough on us. I think the president of the United States should be tough on Saudi Arabia.

: What else can the United States do to help with oil prices in the immediate term?

Askari: I think, without a doubt, this administration has a very bad relationship with American oil and energy companies. I think there should be more cooperation behind the scenes with the oil companies and the administration because they really need to cooperate now.

I know a lot of people don’t believe in fracking, but maybe it’s time to do more fracking. Maybe it’s time to ramp up production. They can also increase production elsewhere. I think that would be extremely, extremely helpful.

And I think the oil companies in the United States — and I don’t support the oil companies, don’t get me wrong — but I think they feel like the administration basically just wants to put them out of business.

: Anything else you would like to add?

Askari: Some people think that OPEC’s decisions are purely economic. Some people think purely political. It has always been both, especially for Saudi Arabia.

In reality, Saudi Arabia and the United Arab Emirates are pushing OPEC’s decision. I think the Americans should understand that it’s not the other members, it’s not Nigeria or Iran. I feel that Americans need to understand who are our friends and who are not.