OPEC Plus October Surprise To Aid The World’s Authoritarians

Robert McElvaine writes at Salon, OPEC’s October Surprise: Higher gas prices a boon to Putin, the Saudis — and Republicans:

The October Surprise of 2022 has arrived, from an unexpected source — as surprises tend to do.

Led by Russia and Saudi Arabia, the oil-producing cartel OPEC and its partners announced on Wednesday it will slash oil production by 2 million barrels a day, which will not merely reverse the steady decline in prices at the pump since early summer but, combined with the usual profiteering by Big Oil, likely cause those prices to soar and reignite inflation. That would be expected to hurt Democrats’ chances — and thereby American democracy’s chances  — in the midterm elections just over a month away.

The best strategy for Democrats is clear enough: Get in front of this immediately, and tell the truth.

The key question: Cui bono?

Who benefits from artificially jacking up gas prices right now? That’s also pretty clear: Vladimir Putin, the de facto Saudi ruler Mohammed bin Salman, the theocratic regime in Iran and Venezuelan strongman Nicolás Maduro, for starters —all of whom are eager to deflect attention from their numerous problems both at home and on the global stage. Oh, and let’s not forget, Charles Koch, the multinational oil companies, a bunch of lower-level autocratic leaders — and the Republican Party.

It’s no mystery. Putin gets an infusion of cash to prop up his possibly-collapsing regime and his disastrous war of aggression in Ukraine, and rising prices at the pump serve to further destabilize American democracy. That’s a win-win as far as he’s concerned. Furthermore, rising energy prices in Europe — which already faces a grim winter — might well weakens the Western alliance supporting Ukraine, which is already showing signs of strain.

Similarly, the regimes in Saudi Arabia, Iran and Venezuela get more money in the door, potentially improving their economies and weaken domestic opposition — an especially urgent issue in Iran, where demonstrations against the regime led by young women have swept across the country.

Koch’s company benefits directly from rising oil prices. More important still, the crusade he and like-minded billionaires have led against democracy and government regulation for more than four decades clearly benefits from defeating the only party in the United States that still (most of the time, and however imperfectly) stands for those things.

Who is harmed by this? Well, pretty much everybody else, but certainly the American people, the world economy, the cause of democracy and the united front against Russia’s war in Ukraine.

Republicans may try not to look gleeful when they’re in public view, but make no mistake: They’re delighted. As Senate Republican campaign chair Rick Scott of Florida put it succinctly last fall, inflation “is a gold mine for us.” As Republicans see it, the more Americans suffer in October, the better things go for them in November.

Republicans are rooting for America’s enemies because it benefits their authoritarian plans in a perverse way.

No doubt there’s room for legitimate debate on the best ways to control inflation and improve the economy. But as usual, Republicans have nothing to offer beyond their one-size-fits-all solution for everything: more tax cuts for the rich. By any normal political standards, that’s a sure loser. But nothing about politics is normal or rational these days, and victory over the forces of unreason and destruction is not guaranteed.

The New York Times reports, Biden Releases More Reserve Oil and Pushes Companies to Keep Up Production:

Biden administration officials have spent more than a week in discussions with their counterparts from oil-producing countries in the Middle East, seeking to minimize production cuts by OPEC Plus, the group led by Saudi Arabia, in an effort to keep global oil prices from rising drastically.

On Wednesday, OPEC Plus announced a production cut of two million barrels a day.

The engagement ahead of the latest meeting of OPEC Plus included outreach by top officials from the State Department, Treasury Department and the National Security Council. Officials familiar with the calls say the efforts have not been a departure from the administration’s efforts over the past year to push oil producers to keep production levels high after Russia’s invasion of Ukraine, which has roiled global markets.

“We are always talking to all producers and consumers, including OPEC Plus partners,” said Adrienne Watson, a spokeswoman for the National Security Council. “That’s been the case for decades and across bipartisan administrations, including this one. 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.”

The administration officials have been reminding their counterparts that the United States plans to boost global oil demand in the near future by purchasing oil at fixed prices in order to refill the nation’s Strategic Petroleum Reserve. Mr. Biden began releasing one million barrels per day from the reserve in March in an effort to boost oil supplies and limit prices.

Refilling the reserve could eventually help stabilize oil demand and pad revenues for large oil-producing countries. The Energy Department proposed a regulation this summer that would allow the government to enter contracts to refill the reserve at fixed prices in the future. That effort could help boost oil production, administration officials say, because it would give oil producers reassurance that they will be able to sell crude at a set rate even if global oil prices dip again.

But in the meantime, the administration responded to the OPEC Plus announcement on Wednesday by saying it would order the release of 10 million additional barrels from the reserve in November. The releases had been scheduled to finish this month.

“The president will continue to direct S.P.R. releases as appropriate to protect American consumers and promote energy security, and he is directing the Secretary of Energy to explore any additional responsible actions to continue increasing domestic production in the immediate term,” said Brian Deese, the director of the National Economic Council, and Jake Sullivan, the National Security Adviser, in a joint statement.

The discussions — and the decisions by global oil producers — come at a fragile time for global oil markets and for Mr. Biden’s domestic political calculations. After falling through the summer, global crude prices have begun to tick up again. So have gasoline prices across the United States, dampening what had been a favorite bragging point for Mr. Biden in recent months.

I warned you months ago that the oil retailers would never allow gas prices to drop to pre-surge levels before Election Day. Oil producers and retailers are driven by insatiable greed.

[As] central banks around the world raise interest rates aggressively to choke off high inflation, fears of a global recession are mounting. That could sap oil demand and send prices plunging, hurting large oil producers. Conversely, prices could soar at year’s end if a new round of European sanctions knocks millions of barrels of Russian oil off the global market each day — which is why administration officials and their allies have pushed an untested plan to allow Russian oil to continue to flow to the market, but only be sold at a reduced price.

The Washington Post adds:

The cut to production also amplifies geopolitical tensions at a precarious moment for the world’s major powers. Biden administration officials had launched an extraordinary effort to press Saudi Arabia to produce more oil to compensate for the global shortage caused by Russia’s invasion of Ukraine, with the president personally visiting Saudi leaders in a trip to Jiddah. With this move, Saudi Arabia has rejected those entreaties at least in part, leaving senior White House officials contemplating their next steps and publicly hinting at unprecedented measures to undercut the gulf nation’s grip on international energy markets.

Russia will benefit from the cut, because lower production will increase the price of oil — helping Moscow finance its war effort in Ukraine. And it could further test Europe’s resolve to support Ukraine ahead of what economists project will be a sharp slowdown in economic growth throughout the continent. American consumers could also be strained by higher gas prices, potentially imperiling the Biden administration’s determination to lower gas costs ahead of the 2022 midterm elections.

This would be the first time the group cut oil production targets since the beginning of the pandemic. And it’s more aggressive than many analysts had expected even a few days ago. The OPEC Plus coalition, which is led by crude-oil giant Saudi Arabia, said the cut in production would take effect in November. OPEC Plus said in a statement the move was necessary to stabilize the recent fall in global energy prices.

“The President is disappointed by the shortsighted decision by OPEC Plus to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” U.S. national security adviser Jake Sullivan and National Economic Council Director Brian Deese said in a statement.

The statement added that the administration will consult with Congress on additional mechanisms “to reduce OPEC’s control over energy prices” — suggesting the U.S. policymakers could be interested in repealing a long-standing exemption to federal antitrust law that allows the consortium to effectively coordinate on prices. If executed, that move would in turn elicit fierce pushback from Saudi Arabia and its allies, analysts say.

Rep. Tom Malinowski (D-N.J.) on Wednesday said he would introduce legislation in response to the cut that would require the Biden administration to remove U.S. troops and missile defense systems from Saudi Arabia and the United Arab Emirates.

“This clearly portends the potential for higher oil prices, reinforcing recessionary forces in the global economy and heightening risks for global financial instability,” said Mark Sobel, a former senior Treasury Department official.

[Naturally], energy stocks climbed higher on the news, contrasting with declines in the financial markets. The immediate impact on gas prices remained unclear. Claudio Galimberti, head of Americas analysis at Rystad Energy, said gas prices are likely to increase in the United States perhaps by roughly 10 percent in much of the country, though the actual increase will depend on many factors.

“The intention of the OPEC Plus cut was to break the fall in crude prices since the summer,” said Bob McNally, an energy analyst at the Rapidan Energy Group. “If they succeed, then gasoline pump prices should also stop falling and range around current levels, until other market drivers impact the price.”

Biden had earlier in his administration vowed to make Saudi Arabia an international pariah, but he re-engaged while trying to use all available channels to curb increases in the price of gas that had hurt his domestic approval ratings.The administration had sought to isolate Saudi Arabia in part because of its human rights record.

The production cuts could lead to considerable political fallout in the United States, where midterm elections will be held in just over a month. Falling gas prices this summer played a big role in lifting the political fortunes of Democrats, who face a tough election season. They also helped elevate Biden’s approval rating[.]

The OPEC coalition’s move could also add to inflationary pressures in the United States and Europe, as well as undercut the effort to bolster Ukraine as it defends itself against the Russian invasion. Russia relies on gas and oil sales for a large portion of its budget and had pushed for the production cut, which will enable Moscow to sell oil for higher prices on the global market, generating more revenue for its war and troop mobilization.

Oil prices jumped this week in anticipation of Wednesday’s news. They are expected to increase further now, probably to over $100 per barrel.

“A large supply cut would delight Moscow, which would benefit from both stabilized if not higher crude prices and an implicit sign of solidarity from its OPEC Plus colleagues as it braces for looming E.U. oil sanctions‚” McNally said before the cut was announced.

[B]efore the OPEC Plus meeting, gas prices were already up sharply in some areas of the United States where there are several hotly contested congressional races, as well as close races for governor. Those increases were propelled by maintenance at refineries on the West Coast and a large fire at a refinery in the Midwest. [This manipulation of gas prices happens every year at this time as refining converts to winter fuel mixture, and heating oil].

Nevada, Washington, Oregon and Alaska have all seen prices jump by at least 40 cents a gallon over the past week. Throughout swing states in the Midwest, the increase has been less severe, but enough for drivers to notice the pain. In California, where there are more than a half-dozen close congressional races, prices jumped 62 cents over the past week to $6.38 per gallon of gasoline.

Oil retailers are manipulating gas prices to produce a desired result, to benefit their lickspittle lackeys in the Republican Party who will do their bidding.

While the White House has little control over the price of gas, which is guided by global markets, Biden has more actively engaged on the matter than many of his predecessors. That includes his order to release 1 million barrels of oil per day from the Strategic Petroleum Reserve, an action that helped lower prices but now makes the United States even more vulnerable to cost increases as it faces the challenge of replenishing.

The administration has already extended the release of that reserve oil into November. But the potential production cuts by OPEC Plus suggest the United States may not be able to restock at the lower prices administration officials had hoped.

“We will continue to take steps to protect American consumers,” White House press secretary Karine Jean-Pierre said Tuesday, ahead of the announcement. “Our focus — and it’s been very clear for the past several months — has been on taking every step to ensure markets are sufficiently supplied to meet demand for a growing global economy.”

She added, “Energy prices have declined sharply from their highs and American consumers are paying far less at the pump than they were several months ago.”

However, Sen. Chris Murphy (D-Conn.) told CNBC in an interview the cut in production should lead to a “wholesale reevaluation of the U.S. alliance with Saudi Arabia,” adding that Biden’s visit this year did not yield the necessary results from Riyadh. “When the chips are down, the Saudis effectively choose the Russians instead of the United States,” he said.

A new bill Wednesday from Malinowski and Rep. Sean Casten (D-Ill.) would also pull U.S. military forces out of Saudi Arabia, relocating about 3,000 troops. Malinowski and Casten called the cut to oil production a “hostile act.”

“It is time for the United States to resume acting like the superpower in our relationship with our client states in the Gulf,” a statement from Malinowski and Casten said.

The increasingly challenging realities of the global energy market are certain to raise tensions between the Biden administration and large oil producers. Biden and other Democrats have been repeatedly attacking oil companies for reaping record profits at a time when consumers are struggling to pay for a tank of gas.

Energy Secretary Jennifer Granholm has previously put oil companies on notice that the administration could use emergency powers to curb exports if the firms do not put more emphasis on boosting their domestic inventories. Oil executives and industry experts have warned such a curb on exports could backfire, tightening the global supply even further and discouraging investment in increased production.

As the OPEC Plus production cut loomed, the leaders of the American Petroleum Institute and American Fuel and Petrochemical Manufacturers sent Granholm a five-page letter on Tuesday warning that restrictions on exports “would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war.”

Oil poducers and retailers are holding the world hostage to their extortionary demand to maintain their price gouging profits in perpetuity. The only answer is to break the world’s reliance on oil with alternative sources of energy. Oil needs to go the way of the horse and buggy industry of the 19th Century, and the criminals who run the carbon monopoly driven from power.