Saudi Arabia's right to its oil policy
US complaints about oil prices should be ignored
The United States is complaining about the oil price. You could say that the nature of the complaints (prices are too high) is predictable, but that isn’t true.
It’s only eighteen months since US senators sent an angry letter to then-Secretary of State, Mike Pompeo, and in-turn Saudi Arabia, fuming that the price was too low, and hinting strongly that Riyadh’s contribution to a supply surplus and - as such a low price - obliged the US to rethink the nature of its ally-status with Saudi Arabia.
The letter did at least perform a service in clarifying the nature of the relationship between the US and its Gulf clients, which - to be very but not unfairly reductive - pay the US protection money in the form of arms deals and an agreeable oil price.
The current complaint, however, is interesting in unifying a broad church of complainants. There are the familiar right-wing complaints; that the oil price is propelling inflation and harming US interests. That it is evidence of a need for the holy ghost of US energy independence. That it is - relatedly - evidence that some of the Biden administration’s minor curbs on US fracking should be rolled back to where they were under Trump.
Progressives however are this time joining the fray. Most are using the opportunity to further the animus with Saudi Arabia and suggest that Mohammed bin Salman - the “murderous maniac in Riyadh”, and other titles relating tastelessly to the killing of Jamal Khashoggi and a “bone saw” - is punishing the US with a high oil price, hoping to harm Biden’s standing as consequence. “Oil price rise another reminder of Saudi Arabia’s lever over Biden” went the Financial Times headline. (To be clear, both bin Salman and the Saudi state are of course murderers, but graphic, insensitive references to the deaths of their victims (or rather, just one of them) also show a willingness to subvert their dignity to domestic US politicking).
The hypothesis of ultimate Saudi responsibility for US energy issues is an unusual opportunity for common cause between political opponents, but it leaves a lot to be desired.
Why is oil expensive?
The cause of people in the US suffering from the high oil price is by and large to be found in the US. The reason the US suffers from a high oil price is because the US uses too much oil.
The US suffers from a high oil price because - despite constant technological progress - US cars are barely any more efficient than they were half a century ago. This is because engineering efficiencies across that time have been swallowed-up to offset more, ever-larger, heavier and more impractical cars.
The US and its car drivers suffer from a high oil price because the entire country has been engineered around car ownership, so that fuel prices (even when they rise) are left unnaturally cheap relative to the social, infrastructure and environmental costs of driving. This also means there is relatively little alternative to driving once oil prices begin - as now - to rise.
One of the main problems of the West’s supremacist thinking - in West Asia but also elsewhere - is the culture of impunity that comes with it and informs reckless policies abroad. In reality, however, supremacist thinking (and doing) goes beyond only a culture of impunity abroad, ultimately creating a culture of impunity at home; a state of mind where you become accustomed to blaming others for problems of your own making, and thereby get worse at addressing them yourself. Vladimir Putin is to blame for the ruinous state of US democracy; Saudi Arabia is to blame for US oil consumption.
Floors and ceilings
Second to the fundamental problem of dependency that the US has with the oil price, is that it in fact wants two limits set on it: a floor and a ceiling. The US has two oil dependencies. The US wants an eat-your-cake-and-have-it oil price that is high enough to keep high-cost US shale producers in business (around $30/barrel), but low enough for the economy not to suffer high costs (problems begin where we are now, around the recent $80/barrel).
Last year, when US senators angrily rebuked Saudi Arabia for releasing more oil (the very thing they now demand), the problem was a rock-bottom oil price at which producers in the fracking heartland of the Permian Basin - with far higher production costs than Saudi or elsewhere to get each barrel out of the ground - would fast be going out of business.
Now the price is back up, Saudi Arabia is angrily being ordered from all corners of the US to release more oil. While critics of Western policy in West Asia will readily employ the term “client state”, and Saudi Arabia is of course a client state, the divergent interests over the oil price demonstrate quite how much of a client the Saudis are expected to behave as, with levels of patronage that should offend even the quite malleable dignity of the House of Saud.
Far be it from me to defend either Saudi Arabia or Mohammed bin Salman, but it is a key part of the goal of a democratic, autonomous West Asia that its states should be able to act in their own and not US interests.
Saudi Arabian interests (while probably not for an oil price this high, which implicitly incentivises alternatives to oil) are nevertheless for an oil price higher than the one that almost anyone (apart from oil producers) in the US wants to see.
Human rights advocates understandably familiar with criticising Saudi Arabia, and understandably eager to instigate resentment of Saudi Arabia in Western capitals that are shamefully comfortable doing business with the regime, are quick to seize a more mainstream opportunity - oil prices rather than human rights and arms sales - to portray bin Salman as an enemy of decent-minded people. Such groups should however be careful regarding whether a Crown Prince, and a House of Saud, with even more fealty to US power, is in the interests of their overall goals, or is even morally right.
On the contrary, Saudi Arabia being required to have economic accountability to its own - rather than US - citizens should be seen as a prerequisite to building other versions of accountability that follow the economic one (even if they should rightly precede it). It is, after all, concern for Saudi budgets and security that are likely to finally rein-in their war in Yemen, where US-based advocacy against weapons licensing and bombing support have failed miserably.
Biden
While the idea of absolute Saudi control over the oil price is a fiction, there is one element over which the US does have total control, but has there paradoxically chosen indisputably to act in Saudi interests. The JCPOA, also known as the Iran Deal, keeps Iranian oil reserves - around the fourth largest in the world - out of the market in almost their entirety, thus enhancing the leverage of Riyadh and Moscow in determining oil supply. US concern at the oil price, and outsized Saudi influence upon it, illustrate that - quite apart from stoking harms in West Asia - the US policy on Iran is self-harming, as well as illegal and immoral.
Aside from this one certainty, there is a good deal of political posturing being done. In remarks that may yet harm him if and when a coming-together does happen, Biden has suggested “there’s a lot of Middle Eastern folks who want to meet with me. I’m not sure I’m going to talk to them”. His refusal to meet Mohammed bin Salman (and thus confer legitimacy on him after the killing of Jamal Khashoggi) has - so the claim goes - left the Saudi Crown Prince angry at Biden personally, and so he is punishing the US. In the eventuality of Biden out-serving (or outliving) the ageing King Salman, so that he eventually does have to liaise with his son abroad, or being successfully depicted domestically as the prime culprit in a high oil price (he isn’t), President Biden may yet come to regret his remarks.
While these remarks might equally help Biden signal to the progressive wing of the Democrats that he genuinely is clamping down on Gulf, Egyptian and Israeli human rights abusers - nothing could be further from the truth. Saudi Arabia is as-likely to condemn Biden’s aloofness as to thank him for curtailing fracking on US federal lands, damaging sentiment, and thereby limiting US oil production (although the Covid downturn is by far the biggest contributor to falling US rig count).
Just as manufacturing consent is integral to controlling political debate, manufacturing a dispute is also useful. Heralding Biden’s toughness on Saudi, even while US-Saudi business remains mostly as-usual, is a better description of what we are seeing now.
Shut-ins
Lost in all the political statements and signalling is a reality of oil wells, oil demand, and the fact neither of these things are entirely predictable or work at the instant behest of Western politicians.
Although Saudi oil reserves are reputedly some of the world’s most accessible and cost-effective to recover, and might genuinely just rely on opening valves, many others are dependent on pressure levels in old wells, pipes that clog with residues when oil flows stop and - particularly an issue in Russia - seasonal conditions such as frost and ice, all of which make it hard and unadvisable to simply shut-off and reopen wells at Western whimsy. This is to say nothing of the less prominent OPEC and non-OPEC members that also between them make up the supply that determines the oil price.
Likewise too, the idea of an oil price that can be altered at will is to misjudge the extremity of the total oil price collapse of March 2020, with oil prices turning negative at the shock of Covid-19 and oil demand disappearing, forcing producing wells to be shut-in. As with global supply chains more generally, energy demand rebounded into a 2021 recovery faster than most predicted, but that still falters at each new virus variant. Quite apart from the tension in global demand and the engineering systems of oil, there are many forces of tension and lag acting on the oil price, all of them less instantaneous than the terms news articles and speeches are used to working in.
In short, oil has gone from very low prices to moderately high ones in a sequence of events that few predicted, and that to plan for was all but impossible. Many foresee energy demand, supply chains and economic activity all stabilising faster than expected next year. For the same reason OPEC doesn’t want to rush supply decisions in an uncertain market, some economists warn against aggressive hikes in interest rates to combat a rapid inflation that could well - inversely but similar to the oil price - fall almost as fast as it has risen.
Overall, to demand that in such a volatile situation any state should change its policy against its own interests and to the good of the US is a dangerous one to make. Those making it should be careful what they wish for, especially if their broader goal is against the unchecked exercise of US power abroad, particularly in West Asia.
The slow but inevitable shift of the global economy away from oil is destined to require from Saudi Arabia an economic nationalism at-odds with US oil interests that are increasingly varying and contradictory. Anything that hastens Saudi Arabia’s movement in this direction should also be welcomed by those seeking rational and just energy and foreign policy from Washington.