Oil takes center stage in Biden’s Mideast trip

Politics

(NewsNation) — President Joe Biden on Wednesday opened his first visit to the Mideast since taking office, a four-day whirlwind trip that includes a stop in Saudi Arabia, one of the world’s largest oil exporters.

With a focus on lowering gas prices here at home, oil production is expected to take center stage during the trip. Biden is urging OPEC nations, led by Saudi Arabia, to ramp up oil production.  

Even if Saudi Arabia is willing to up production, however, there are doubts that the kingdom can boost output fast enough — and in amounts large enough — to actually make a difference in the price of gas in the U.S.

“There is a lot of skepticism that they’re actually having the capacity to achieve this additional output,” said Ednilson Bernardes, professor of global supply chain management at West Virginia University. “They might be able to pull it off over one month or a few months, but not beyond that. It’s very challenging.”

U.S. Deputy Treasury Secretary Wally Adeyemo said on Wednesday that U.S. prices remain too high and the Biden administration must do everything it can to bring them down, including promoting a price cap for Russian oil exports.

Adeyemo told CNBC in an interview that he believes other countries will be “very interested” in the price cap idea now being discussed by Treasury Secretary Janet Yellen with G20 finance chiefs because it would further bring down their costs for energy.

Even if Biden’s visit goes smoothly, there may not be any immediate relief because oil production targets are governed by an agreement reached among the members of OPEC+, a cartel that includes Saudi Arabia and Russia. And while the current agreement expires in September, concern about a potential worldwide recession could make oil producers wary about pumping more.

Under White House pressure, OPEC said it would boost production last month, agreeing to up output by 230,000 barrels a day. But the cartel is struggling to meet that goal, raising questions about its overall production capability.

Right now, Saudi Arabia is producing just over 10 million barrels a day. That’s 700,000 barrels a day behind its target for June.

“They were talking about 12 million barrels a day. And that’s about a million barrels beyond what they’re currently producing,” Bernardes said. “And that they have never produced at that level.”

As prices rise, the president is also targeting American oil producers and refiners, accusing them of price gouging and profiteering.

Industry representatives say the president is right to deal with the Saudis but want him to do more to encourage production here at home.

“Anytime we’re engaging diplomatically at the highest levels, with strategically important countries on energy, that’s a good thing,” said Frank Macchiarola with the American Petroleum Institute. “That’s important. It’s important not just for the United States, but for global energy markets. But there’s more we can do here at home.”

The president has continued to push gas companies in the U.S. to bring down the price, tweeting, “It’s time for gas retailers to pass the cost declines they’re feeling in the market onto American families at the pump.”

If Biden is successful in persuading Saudi Arabia to pump out more oil and release some of its own reserves, it could bring some relief, but it won’t be enough to have that big of an impact at the pump. In order to do that, they’ll need to keep higher levels of production up over several months.

Reuters and the Associated Press contributed to this report.

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