White House lobbying fails to prevent OPEC+ production cut

[oil&gas]

Oct 5, 2022

WASHINGTON -- A desperate, last-ditch effort by the Biden White House to convince OPEC+ members to vote against a proposed production cut at Wednesday’s meeting in Vienna failed, as the oil-producing cartel announced a larger-than-expected output cut of 2 million barrels per day.

Shortly after the announcement, President Joe Biden told reporters at the White House he thought the cut was “unnecessary,” although he said he had yet to see all the details.

Following Biden’s remark, White House officials said the president was “disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.”

Until Wednesday, the White House had avoided making any public comments that suggested there was friction between Washington and the leading OPEC member states.

But behind the scenes, members of the Biden administration had been “pulling out all the stops,” reaching out to partners in the Persian Gulf and warning of drastic consequences to the global economy if a production cut was announced, according to multiple people familiar with the situation.

The White House even tried, unsuccessfully, to enlist companies to speak out against a production cut, according to people who asked to remain anonymous to describe private conversations.

Wednesday’s announcement was OPEC’s first major output cut since the early days of the coronavirus pandemic in 2020.

With U.S. midterm elections just a month away, any increase in gasoline prices resulting from higher oil prices would be a political gift to Republicans, who have blamed Biden for the record high gas prices brought on primarily by Russia’s invasion of Ukraine.

As a member of the expanded OPEC+ group, Russia is poised to benefit significantly from the decisions made at Wednesday’s meeting, which was attended in person by Russian Deputy Prime Minister Alexander Novak (below).

The Kremlin is heavily dependent on oil export revenue to fund its war in Ukraine, and its own petroleum production has fallen since the start of the invasion.

The newly announced production cut will buoy Russia’s oil revenue heading into winter, when demand for Russian energy from Europe and Central Asia typically rises.

This is especially important for Moscow given that the European Union is preparing to impose a Russian oil embargo, and G-7 nations are finalizing plans to impose a limit on the price that G-7 nation oil transporters are allowed to pay for Russian oil they plan to ship to Asia and Africa.

White House lobbying fails to prevent OPEC+ production cut

Lower production is likely to drive up prices at the pump, a political gift to Republicans this close to the midterm elections.

www.cnbc.com

 

[oil&gas]

Inside the White House’s failed effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’

Oct 5, 2022

The Biden administration launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.

But that effort appears to have failed, following Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that, as expected, announced a significant cut to output in an effort to raise oil prices. That in turn will likely 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 meeting in Vienna agreed to an even larger production cut than the White House had feared — 2 million barrels per day, beginning in November, according to a readout of the meeting released on Wednesday. The ministers said the cuts were necessary “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

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’ve made clear our views to the OPEC members.”

For the past several days, Biden’s senior-most energy, economic and foreign policy officials were enlisted to lobby their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the United Arab Emirates to vote against cutting oil production. Wednesday’s production cut amounts to the largest cut since the beginning of the pandemic and could lead to a dramatic spike in oil prices.

Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”

“It’s important everyone is aware of just how high the stakes are,” said a US official of what was framed as a broad administration effort that is expected to continue in the lead up to the Wednesday OPEC+ meeting.

The White House is “having a spasm and panicking,” another US official said, describing this latest administration effort as “taking the gloves off.” According to a White House official, the talking points were being drafted and exchanged by staffers and not approved by White House leadership or used with foreign partners.

In a statement to CNN, National Security Council spokesperson Adrienne Watson said, “We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that.”

For Biden, a dramatic cut in oil production could not come at a worse time. The administration has for months engaged in an intensive domestic and foreign policy effort to mitigate soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to pay off, with US gasoline prices falling for almost 100 days in a row.

But with just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid. As US officials have moved to gauge potential domestic options to head off gradual increases over the last several weeks, the news of major OPEC+ action presents a particularly acute challenge.

Watson, the NSC spokesperson declined to comment on the midterms, saying instead, “Thanks to the President’s efforts, energy prices have declined sharply from their highs and American consumers are paying far less at the pump.”

Amos Hochstein, Biden’s top energy envoy, played a leading role in the lobbying effort, which has been far more extensive than previously reported amid extreme concern in the White House over the potential cut. Hochstein, along with top national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues as a follow up to Biden’s high-profile visit to Saudi Arabia in July.

Officials across the administration’s economic and foreign policy teams were also been involved with reaching out to OPEC governments as part of the latest effort to stave off a production cut.

The White House asked Treasury Secretary Janet Yellen to make the case personally to some Gulf state finance ministers, including from Kuwait and the UAE, and try to convince them that a production cut would be extremely damaging to the global economy. The US has argued that in the long-run a cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would be designed to accomplish. Their logic is that “cutting right now would increase risks of inflation,” lead to higher interest rates and ultimately a greater risk of recession.

“There is great political risk to your reputation and relations with the United States and the west if you move forward,” the White House draft talking points suggested Yellen communicate to her foreign counterparts.

A senior US official acknowledged that the administration lobbied the Saudi-led coalition for weeks to try to convince them not to cut oil production.

Wednesday’s production cut comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman on a trip that was driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to increase oil production which would help bring down the then-skyrocketing gasoline prices.

When OPEC+ agreed a few weeks later to a modest 100,000 barrel increase in production, critics argued Biden had gotten little in return.

The trip was billed as a meeting with regional leaders about issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for rehabbing the image of the crown prince who had been directly blamed by Biden for orchestrating the killing of Washington Post columnist Jamal Khashoggi.

In the months leading up to the meeting, Biden’s top aides for the Middle East and energy, McGurk and Hochstein, shuttled between Washington and Saudi Arabia planning and coordinating the visit.

One diplomatic official in the region described the US campaign to block production cuts as less of a hard sell, and more of an effort to underscore a critical international moment given the economic fragility and ongoing war in Ukraine. Though another source familiar with the discussions told CNN it was described by a diplomat from one of the countries approached as “desperate.”

A source familiar with the outreach says a call was planned with the UAE but the effort was rebuffed by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Neither did Saudi Arabia’s. The UAE embassy declined to comment.

Publicly, the White House has cautiously avoided weighing in on the possibility of a dramatic oil production cut.

“We are not members of OPEC+, and so I don’t want to get ahead of what could potentially come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters Monday. The US focus, Jean-Pierre said, remains “taking every step to ensure markets are sufficiently supplied to meet demand for a growing global economy.”
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www.cnn.com

 

[oil&gas]

 

[jcpro]

Well, Joe did campaign on making the SA a "pariah state". Don't burn bridges unless you're a very good swimmer. The trouble with Joe is that he can barely walk.

 

[danmand]

Well, Joe did campaign on making the SA a "pariah state". Don't burn bridges unless you're a very good swimmer. The trouble with Joe is that he can barely walk.

I think it is simply a sign - more will come - that the dominance of the US economy is fading.

 

[jcpro]

Not

I think it is simply a sign - more will come - that the dominance of the US economy is fading.

Not really. America and Canada are energy self sufficient, but they're saddled with leaders who still think it's 1977.

 

[danmand]

Not
Not really. America and Canada are energy self sufficient, but they're saddled with leaders who still think it's 1977.

You are welcome to disagree, but I think the dominance of the $ is fading.

USA - against the wishes of Russia - has forced a marriage of Russia and China, while forcing a divorce between Germany and Russia.

With Russian raw materials and Chinese manufacturing I cannot see Europe and North America being able to compete.

Fortunately, we have enough oil and gas to not freeze to death. Think of the poor Europeans.

 

[jcpro]

You are welcome to disagree, but I think the dominance of the $ is fading.

USA - against the wishes of Russia - has forced a marriage of Russia and China, while forcing a divorce between Germany and Russia.

With Russian raw materials and Chinese manufacturing I cannot see Europe and North America being able to compete.

Fortunately, we have enough oil and gas to not freeze to death. Think of the poor Europeans.

The US investors are sitting on literally trillions in cash, waiting for the right climate to invest. As for Russia and China, time will tell.

 

[danmand]

The US investors are sitting on literally trillions in cash, waiting for the right climate to invest. As for Russia and China, time will tell.

Isn't that a perfect illustration of the problem? The only things they can give a return are financial instruments.

 

[Frankfooter]

Oct 5, 2022

WASHINGTON -- A desperate, last-ditch effort by the Biden White House to convince OPEC+ members to vote against a proposed production cut at Wednesday’s meeting in Vienna failed, as the oil-producing cartel announced a larger-than-expected output cut of 2 million barrels per day.

Oil despots are all the same, aren't they?
They just want to make more money, screw the planet and its peoples.

MBS, Putin and the entire oil & gas industry.

Transition can't come fast enough.