Biden’s Saudi trip won’t help gas prices
President Joe Biden is set to visit Saudi Arabia later this week, on a trip he says is intended to shore up global supply chains and encourage diplomacy and cooperation.
This is because Saudi Arabia possesses the second-largest oil reserves in the world, and the United States has made it quite plain that it wants all of the oil states in the Persian Gulf to increase their production. It is generally accepted that higher oil production will result in lower prices at the pump for gasoline.
In practice, things are much more convoluted.
It is difficult for Saudi Arabia to reach its own production goals, thus the country does not have a significant surplus of oil to give away. The release of any additional oil would necessitate the kingdom to reach an agreement with the other members of the OPEC+ coalition.
According to Paul Sankey, lead analyst at Sankey Research, a research organization, “there is no way to visit Saudi Arabia without it having in some form of tie to oil.” “However, given the circumstances of this situation, it does not appear that there is much that can be done.”
Even if Saudi Arabia were to flood the world market with additional oil, there is no assurance that this would result in a decrease in the price of gasoline. According to Ben Cahill, a senior scholar at the Center for Strategic and International Studies, the fluctuation in oil prices over the past few weeks has little to do with supply disruptions. This is the reason for the volatility in oil prices.
The invasion of Ukraine by Russia has thrown the global oil markets into disarray because of the uncertainty it has produced.
According to Cahill, “a significant portion of the price run-up is related to geopolitics and financial speculation.” “If you look at the physical market, which is the actual demand and trading of the physical barrels of petroleum, there isn’t any disturbance whatsoever,” said one analyst. “[T]here is no disruption everywhere.”
Then why are you going?
The concept that the president’s trip is intended to drive down the price of fuel has been downplayed by the president. Vice President Biden told reporters a month ago that the president will not directly push Saudi leaders to increase oil production.
However, Cahill claims that the president does not have many choices open to cope with the rapidly rising cost of gasoline. According to AAA, the national average price of a gallon of gasoline is currently $4.678, which is a decrease from the more than $5 that it was just one month ago. One of these options is to seek assistance from OPEC.
According to what he had to say, “it won’t have an immediate impact; but, this kind of discussion between Washington and Riyadh is good, and it should be encouraged.”
However, Cahill stated that the trip itself most likely has more to do with concerns of regional security than it does with oil output.
As a candidate for president, Joe Biden committed label Saudi Arabia a “pariah state” following the conclusion of an intelligence report from the United States that Saudi Crown Prince Mohammed bin Salman was responsible for the murder and dismemberment of journalist Jamal Khashoggi of the Washington Post.
Biden, though, defended his travel by claiming that it is necessary for the security interests of the United States in an opinion piece that was published this weekend in the Washington Post. According to what he had said, the region is “important to global trade and the supply chains we rely on,”, especially in light of the sanctions that have been placed on Russia as a consequence of its invasion of Ukraine.
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