Chilled By Biden, Saudi Arabia Leads OPEC To Cut Oil Production. Gas Prices Could Soar.

Saudi Arabia is set to lead OPEC, alongside Russia, to reduce oil production by over one million barrels per day, starting next month. The move could generate an increase in U.S. inflation as gasoline prices may spike up to 26 cents per gallon. Furthermore, Saudi Arabia plans to reduce production by an extra 500,000 barrels per day, beginning in May. Since its announcement, oil prices have surged by 7.5%, and experts expect a potential impact of rising gas prices. This decision follows OPEC’s resolution in October 2020, to cut production by two million barrels a day.

However, the relationship between Saudi Arabia and the United States has deteriorated during President Joe Biden’s administration. In 2019, while campaigning for the presidency, Biden called Saudi Arabia a ‘pariah,’ creating tensions between the two nations. Former Secretary of State Mike Pompeo noted that Saudi Arabia is an essential security partner for the United States and has been instrumental in safeguarding the U.S. from Iran, his leadership’s biggest threat. Unlike Trump’s administration, Biden’s presidency has created significant diplomatic strains between Saudi Arabia and the United States. Consequently, the Saudis are negotiating to ally with Iran, their most significant enemy, brokered by China.

Energy experts suggest that OPEC has information about demand trends and inventory supplies that the world is yet to uncover fully. Christyan Malek, the global head of energy strategy at JP Morgan, confirms the preventive nature of OPEC decisions. Meanwhile, Ole Hansen, an oil analyst at Denmark’s Saxo Bank, speculates that Saudi Arabia’s production cut reflects its concerns about a possible increase in U.S. interest rates.

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