Biden doesn’t want OPEC to increase oil production

Biden’s rejected call for OPEC members to increase oil production has left many DC think tankers hyperventilating about the US being hung out to dry by its allies. In fact, the US president was hoping to be spurned, because OPEC is much more valuable to him as a political scapegoat. After all, loosening OPEC’s spigots would do little to address the problems facing the US economy.

As the incumbent in a democracy, Biden’s most pressing issue is voter attitudes as the mid-term elections approach. In a March 2022 Gallup poll where voters were asked to report the “most important problem facing the country today,” 17 percent reported inflation, and only 4 percent cited fuel/oil prices.

In contrast, 68 percent chose non-economic problems, including poor leadership (22 percent), the situation with Russia (9 percent), immigration (5 percent), and various other issues. Biden will be keenly aware that energy-related price inflation is not the major problem that he needs to address between now and November when the voters head to the polling stations.

Moreover, the breakdown of consumer prices makes it plainly clear that rising gasoline prices are a partial contributor to inflation, but that there exist many other unrelated causes. These include soaring food prices, sharp rises in the price of consumer durables such as new and used vehicles caused by disruptions to microprocessor production, and general inflation related to supply chain bottlenecks. The US economy is also paying the price (literally) for almost 15 years of loose monetary policy.

Further, the ability of OPEC members such as Saudi Arabia and the United Arab Emirates to affect global oil prices at present is considerably lower than what these think tankers screaming like banshees would have you believe. The current rise in prices is caused primarily by a collapse in oil investments during the last 5 years, and question marks over Russian oil. Increased production by the Gulf countries would help. However, one can see the limited impact of the US’ decision to release oil from its strategic reserve as an indicator of where the true problems lie.

As it happens, rising oil prices also confer benefits upon Biden. OPEC’s pact is contributing to oil price stability – the peaks and troughs would be even sharper were it not for its intervention. If Saudi Arabia and the UAE were to unilaterally break ranks now, a heavy cost would be paid by all in the long-run as we revert to even more erratic oil prices. And in the short-run, America’s domestic energy industry, including the shale oil producers hit hard by falling prices during COVID-19, is reaping the benefits of buoyant energy prices, contributing to US energy security.

Put short, even a totally acquiescent OPEC would have little impact on Biden’s electoral interests, and it’s not clear that he would change much in their behavior. So why the hysteria about spurned overtures?

Biden’s long career in the nation’s capital means that he has had a front row seat watching OPEC’s activities for the entirety of its existence. Consequently, he is acutely aware of the group’s tacit role as a willing scapegoat for Western economic problems for most of the last 50 years.

A long list of presidents, including Nixon, Johnson, Carter, Raegan, Bush Sr., Clinton, and Bush Jr., have benefited electorally from OPEC’s desire to look like the West’s nemesis by blaming the bloc for sundry economic woes faced by American voters. In every country, appealing to the electorate’s latent racist and xenophobic tendencies is usually a winning formula, and America is no exception.

Obama and Trump suspended and modified this approach for a while as the shale oil revolution changed America’s energy interests. However in 2022, with inflation soaring again, Biden has decided to look down the back of the sofa for some loose change, and has come up with the erstwhile reliable strategy of: “Blame OPEC.”

That’s why the US president was crossing his fingers that his calls for more oil would be rejected. The DC think tankers running around with their heads on fire either haven’t bothered to look at the numbers, or have simply exploited the rhetoric to advance their usual anti-Saudi/Emirati agenda.

The US political system has been decaying since the 1970s, and has become deeply dysfunctional. Biden is not responsible, and has actually done well to stop the rot compared to some of his predecessors. Nevertheless, as the polls indicate, he has made many errors, too. Winning elections is his job description, and so scapegoating OPEC is a reasonable – albeit likely futile – strategy. But for the journalists and scholars whose job it is to provide sober analysis, the time is right for a deep breath and a deeper look at the numbers.