The White House has launched a last-ditch effort to cut OPEC oil production to avoid a “total disaster.”



Washington
CNN

The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to force Middle Eastern allies to sharply cut oil production, according to multiple sources familiar with the matter.

The boost comes ahead of a crucial meeting on Wednesday of OPEC+, the international cartel of oil producers, which is expected to announce significant output cuts in an effort to prop up oil prices. That, in turn, would cause US gasoline prices to rise at a precarious time for the Biden administration, five weeks before the midterm elections.

In recent days, President Joe Biden’s top energy, economic and foreign policy officials have been lobbying their foreign counterparts in Middle Eastern allies to vote against cutting oil production in Kuwait, Saudi Arabia and the UAE.

Members of the Saudi-led oil cartel and its allies, known as OPEC+, including Russia, will announce production cuts of more than a million barrels a day. That would be the biggest cut since the pandemic began and could lead to a dramatic rise in oil prices.

Some of the talking points from the White House to the Treasury Department on Monday, obtained by CNN, framed the prospect of production cuts as a “total disaster” and warned that it could be viewed as a “hostile act.”

“It’s important that everyone knows how high the stakes are,” one US official said of what was billed as a broad administration effort expected to continue until Wednesday’s OPEC+ meeting.

Another US official said the White House is “spasming and panicking”, describing this latest administration effort as “taking off the gloves”. According to a White House official, the speeches were being written and exchanged by staff and were not approved by White House management or used with foreign partners.

In a statement to CNN, National Security Council spokeswoman Adrienne Watson said: “We have been clear that energy supplies must respond to demand to support economic growth and lower prices for consumers around the world, and we will continue to talk to our partners about this.”

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

But with critical midterm elections just a month away, U.S. gasoline prices have started to rise again, creating a political risk the White House is desperately trying to avoid. As U.S. officials have moved to weigh domestic options in recent weeks to deal with gradual increases, news of major OPEC+ actions presents a particularly sharp challenge.

Watson, the NSC spokesman, declined to comment on the midterm mandate, instead saying, “Thanks to the president’s efforts, energy prices have fallen significantly from their highs and American consumers are paying much less at the pump.”

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

Officials from the administration’s economic and foreign policy groups have also been involved in contacts with OPEC governments in a last-ditch effort to avoid a production cut.

The White House has asked Treasury Secretary Janet Yellen to personally make the case to finance ministers from several Gulf states, including Kuwait and the UAE, to try to convince them that a production cut would be very damaging to the global economy. The US has argued that long-term oil production cuts would put more downward pressure on prices than would be designed to achieve a significant cut. Their logic is that “cutting them right now would increase the risks of inflation,” leading to higher interest rates and ultimately a greater risk of recession.

“There is great political risk to your reputation and your relationship with the United States and the West if you go ahead,” the White House talking point told Yellen to communicate to foreign counterparts.

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

The arrival comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman, a trip motivated in part by his desire to persuade Saudi Arabia, the de facto leader of OPEC, to increase oil production. it would help lower gas prices that were rising at the time.

President Joe Biden (L) and Saudi Crown Prince Mohammed bin Salman (R) arrive for a family photo during the Jeddah Security and Development Summit (GCC+3), July 16, 2022, at a hotel in Jeddah, on the Red Sea coast of Saudi Arabia.  .

When OPEC+ agreed to increase production by 100,000 barrels a few weeks later, critics argued that Biden got little out of the trip.

The trip included a meeting with regional leaders on issues key to US national security, including Iran, Israel and Yemen. He was criticized for the lack of results and for restoring the image of the crown prince, whom Biden directly accused of orchestrating the murder of Washington Post columnist Jamal Khashoggi.

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

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

A source familiar with the disclosure says a call was arranged with the UAE but Kuwait rejected the effort. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Not even from Saudi Arabia. The UAE embassy declined to comment.

Publicly, the White House has carefully avoided discussing the possibility of dramatically cutting oil production.

“We are not members of OPEC+, so I don’t want to prejudge what might come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters on Monday. The US focus, according to Jean-Pierre, “continues to take every step to ensure that the markets are sufficiently supplied to meet the demand of a growing global economy”.

OPEC+ members are making more dramatic cuts because of the dramatic drop in prices, which have fallen below $90 per barrel in recent months.

Hanging over Wednesday’s OPEC+ meeting in Vienna will be an oil price cap European nations want to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not just Russia, have expressed unhappiness with the prospect of a price cap because of the potential precedent set by consumers, rather than the market, in determining the price of oil.

Included in the White House Treasury talks was a US proposal: if OPEC+ decides against a cut this week, the US will announce a purchase of up to 200 million barrels to replenish its emergency oil stockpile, the Strategic Petroleum Reserve (SPR). The US has used it this year to help lower oil prices.

The administration has made it clear to OPEC+ for months, the top US official said, that the US is ready to buy OPEC oil to renew the SPR. The idea has been to convey to OPEC+ that the U.S. “will not be left dry” if they invest money in production, the official said, so that prices will not fall if global demand falls.