In a statement issued on Monday by the Ministry of Foreign Affairs, Egypt expressed its supports for the position expressed by Saudi Arabia in explaining the technical considerations of the OPEC+’s recent decision.
The decision primarily aims to introduce some discipline in the oil market and to enhance the ability of the international community to deal with the current economic challenges.
OPEC+’s decision to reduce oil production by two million barrels per day has provoked an unprecedented state of panic and anger in Washington, given its negative political and economic repercussions on the US, its allies, and oil-consuming countries alike.
This decision reflected the extent to which members of the organisation were concerned about the decline in demand, considering it necessary to reduce market volatility, regain control over it, and keep prices high and stable within $100 per barrel.
The decision also put Saudi Arabia on a collision course with the White House, which accused the kingdom of siding with Russia, which is also an OPEC+ member.
It is expected that four Arab countries — namely Iraq, Kuwait, the UAE, and Saudi Arabia — will bear the bulk of the reduction, in return, they will benefit from the increase in prices.
The decision came despite US President Joe Biden warning that there would be “consequences” for this step, which could lead to higher oil prices and thus fill Russia’s coffers from its oil revenues to finance its war in Ukraine.
Washington said on Thursday that the reduction would boost Russia’s revenues, asserting that Riyadh planned this decision for political reasons. Consequently, Saudi Arabia on Sunday categorically denied supporting Moscow in its war on Ukraine.
The decision to reduce production comes at a critical time for the Biden administration — almost a month before the mid-term congressional elections. There is a risk that this reduction, which will take effect on the first of November, will cause gasoline and gas prices to rise.
If prices were to rise in the US, it would be a complete political disaster for the administration of Democratic President Biden. His Republican opponents will use it as proof of the failure of his economic policies and then influence the attitudes of the American voter on polling day.
This is exactly what the president and his team were trying to avoid. In the past few weeks, the US Department of Energy has been gradually reducing gasoline and gas prices from the highs reached last summer.
The US’ response came in an angry statement by US National Security Adviser Jake Sullivan and Director of the White House Economic Council Brian Deese.
The statement expressed President Biden’s disappointment with the decision, calling it “short-sighted”, especially since the global economy is currently suffering from the consequences of the Russian invasion of Ukraine.
Immediately, in a move aiming to protect American consumers, the US president ordered the Department of energy to release 10 million barrels of the US’ Strategic Petroleum Reserve to the markets as soon as the production cut goes into effect on 1 November and to continue to resort to the reserve whenever needed.
Furthermore, Biden is expected to hold consultations with members of Congress to search for additional tools and mechanisms to reduce OPEC’s control over energy prices, reduce US dependence on foreign sources of fossil fuels, and accelerate investments in clean energy.
Many American politicians believe that the organisation’s decision puts it in an unspoken alliance with Russia. According to a report published by CNN, Washington may consider OPEC+’s decision to cut its oil production a “hostile act” against the US and may take unprecedented measures against its ally Saudi Arabia to reduce its influence in the oil market.
Washington also believes that Russia will be the biggest beneficiary of this decision because the reduction will raise the price of barrels, which will help the Russian treasury finance the Russian war effort over Ukraine.
Moreover, this rise will also slow down the rate of economic growth across the world and will affect the volume of Western financial and military support to Ukraine in the face of the Russian invasion.
Voices in the US Congress have begun to call for reconsidering the relationship with Riyadh. US Democratic Representative Tom Malinowski put forward a bill in the House of Representatives demanding that the Biden administration withdraw the US’ missile defence systems and 3,000 troops from Saudi Arabia and the UAE, asserting that “it is time for the United States to resume its role as a superpower in its relationship with its customers in the Gulf.”
In remarks to CNBC, Democratic Senator Chris Murphy said: “The reduction in production forces us to comprehensively reconsider the US’ alliance with Saudi Arabia. This is about how, at a time of crisis, the Saudis choose to ally with the Russians instead of the Americans,” he said.
The new challenges posed by the global energy market are sure to raise tensions between the Biden administration and the major oil-producing countries led by the Gulf states, which — in the opinion of the Americans — have been reaping record profits at a time when consumers around the world are facing major living difficulties.