Why Biden’s Saudi trip could nudge the kingdom on oil production
President Biden’s trip to Saudi Arabia may help prod the country toward increasing oil production — but it’s unlikely to lead to a radical change in the kingdom’s plans.
Oil prices will be on the president’s mind during the controversial trip, which has come under criticism from progressives who say the administration should shun the Saudi leadership over its human rights record, the war in Yemen and the murder of former Washington Post journalist Jamal Khashoggi.
Biden is battling prices that have recently averaged $5 per gallon across the country, which along with inflation have produced stiff headwinds for Democrats facing a difficult midterm election year.
The administration would welcome an effort by the Saudis to increase global supplies in a way that might offset, to some degree, the market disruption caused by the Russian invasion of Ukraine.
But experts are saying that U.S. drivers shouldn’t hold their breath.
“It adds to the incentive to increase production, but I do think the Saudis are looking at the overall market dynamics and trying to respond in a relatively careful way,” said Joseph Majkut, director of the energy security and climate change program at the Center for Strategic and International Studies.
He said any difference from the trip is likely to be modest, even though the Biden visit will be “an important signal that the two countries are working together on energy issues.”
The White House has said there will continue to be discussions with producers like the Saudis.
“We’re in constant contact not just with producers in the Gulf, but producers globally. We’re also working, obviously, on domestic production as well. And those conversations will continue during this trip,” National Security Advisor Jake Sullivan told reporters on Wednesday.
“They — you know, the president talked about energy security in Asia, he talked about energy security in Europe. He’ll talk about energy security here,” he added.
Saudi Arabia is the world’s second-largest oil producer, behind only the United States. This, combined with the fact that Saudi Arabia has at least some “spare capacity” — the oil it can quickly bring onto the market — mean it is a place where the Biden administration can look to try to alleviate high prices.
Antoine Halff, the former chief oil analyst at the International Energy Agency, told The Hill that he expects Saudi Arabia to increase its production regardless of the visit.
“A production increase is forthcoming, it might not be huge, but there’s going to be a production increase,” said Halff, who is now an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy.
He suggested an increase in production would now be presented as a win for Biden from the trip.
“It’s more likely to be presented as a gesture to Biden,” he said, to allow Biden to return with “some claim” of being able to increase supply.
Samantha Gross, director of the Brookings Institution’s Energy Security and Climate Initiative, meanwhile, was skeptical of whether the trip would have any impact at all.
“I think the impact of this trip on the oil market is going to be zero to very small,” she told The Hill in an interview. Not only do producers like Saudi Arabia and the United Arab Emirates likely currently have little more production capacity, “they also for sure don’t have a lot of motivation to use it.”
“They’re enjoying the high prices, and I don’t think the prices are so high that they’re demand-destroying,” she added.
At the end of the day, Gross said, any attempts at prodding the Saudis to produce more gas will likely run up against the fact that the U.S. has little to incentivize the kingdom to step it up.
“I don’t feel like the U.S. does have a lot to offer,” she said.
Oil markets have surged since Russia’s invasion of Ukraine — sending gasoline prices soaring.
Halff said that this has been at least partly because of a “reshuffling” of the market following the invasion, with more Russian oil going to India and China, while more Middle Eastern oil has flowed to Europe.
Other factors in high prices have included a lack of private investment in new drilling and demand recovery after the end of COVID-19 lockdowns.
Analysts say the fact that the world’s two biggest oil producers are talking again is good news in the context of high gas prices.
Tom Kloza, global head of energy analysis at the Oil Price Information Service, said he expects the trip to be more likely to be the start of something, rather than an endpoint that brings more oil and lower prices right away.
“I don’t think there’s an expectation that [the Saudis will] necessarily make any additional oil pledges this quarter or even the next quarter,” Kloza added. “But hopefully, it will be the start of a dialogue and maybe an eventual rapprochement.”