Saudi Shenanigans

[Jacob]

It looks like the Saudi are leading OPEC to cut oil production, driving gas prices up at a pretty critical juncture.

From an American-centric perspective it could look like an attempt to influence the midterms in favour of the GOP. From a European-centric perspective, it could look like an attempt to put the economic hurt on Europe as much as possible during the upcoming winter. From a NATO/ Ukraine perspective, it kind of looks like an attempt to support Putin.

Those are just knee-jerk reactions though. Has anyone come across more in depth analysis on what's going on here?

[Josquius]

Strange they'd want to help Putin given how much the Muslim world stands to suffer from the food situation.

[Barrister]

To be charitable to the Saudis (maybe for the first and last time from me)...

The entire point of OPEC is to keep oil prices up.  Saudi Arabia in particular is a swing producer - it can easily increase or decrease production depending on overall demand.  Other oil producers are not that flexible just because of the geology of their deposits.

IIRC in the spring oil prices were surging, going above $120 / bbl.  The Saudis agreed to increase production.  The price of oil has dropped by one third from that level, going down to $80 / bbl.  Saudis don't want it to keep falling so they are cutting production.

Now I don't particularly like or trust MBS, so it's possible there's more to the story.  But the simplest version of the story could very well be true also.

[Barrister]

Strange they'd want to help Putin given how much the Muslim world stands to suffer from the food situation.

And yeah, of the reasons suggested:

-to support the GOP.  Yes, MBS seems to clearly favour Trump and the GOP over Biden.  But the worldwide price of oil is a very blunt instrument to try and effect US voting behaviour.

-economic hurt to Europe.  Remember this is talking about oil, not natural gas, which is where Europe is vulnerable due to the lack of Russian gas.  The only "hurt" on Europe is just the generic hurt of higher oil prices.

-NATO/Ukraine - I haven't heard that Saudi has any particular dog in the fight.  Relations with Ukraine have been good, and Saudi has voted in favour of Ukraine in the UN.  Relations with Russia are also good, as although Russia is not a part of OPEC the Russians do work closely with OPEC.

[Jacob]

A reasonable take BB.

[celedhring]

They are also probably trying to get ahead of an upcoming recession.

[HisMajestyBOB]

Strange they'd want to help Putin given how much the Muslim world stands to suffer from the food situation.

MBS isn't going to starve, so why would he care? He seems to be pretty confident that his security forces have enough loyalty and bullets.

[OttoVonBismarck]

Yeah, I tend to lean towards "KSA acting largely in its self-interests", and doubt the main motivation is manipulation of the U.S. political system or the Russia / Ukraine conflict. The reality is KSA's long beneficial relationship with the United States is not feasible if it only benefits when one party is in power, so going whole hog to support one of the two parties, when KSA knows power will change hands over time, would be short sighted--and absolute monarchs generally don't have to think in such short sighted ways because they aren't subject to an upcoming election.

On a meta level, a big premise of how KSA has managed its oil reserves is it wants to see as much of its oil that gets pumped as possible, to be pumped at relatively high prices. The Saudis have long known they are a one trick pony, and they have long known that this oil largesse is a generational thing that is not forever. They have desperately tried to spend money and find ways to build...some sort of future for when it is gone. Part of that scheme means they need to milk the oil for as much as possible while the getting is good, so it is rarely beneficial to the Saudis when they have to sell barrels at $45/barrel.

Additionally, recessions always tank the oil market if they run very long. Demand simply goes down. I think the Saudis are anticipating a global recession, and simply trying to get ahead of the curve. Most economists seem to expect a global recession is imminent as well. As some evidence of this, note that the demand for oil was already slacking--the 2 million barrel a day production cut will actually only be a 900,000 or so barrel cut, as per oil industry analysts. Why? Because the cut is on the OPEC cap of production, and most OPEC+ members were already below their allotted cap, so only about 900,000 barrels a day in current production is being reduced to align with the new caps.

[Barrister]

https://www.vox.com/world/2022/10/7/23391575/opec-oil-prices-biden-naive-saudi-arabia

Saudis are doing it because it's in their best interests, and US doesn't have enough clout to get them to do otherwise.

[OttoVonBismarck]

I somewhat disagree w/the concept of Biden's clout factoring in. For most of the history of the U.S. relationship with Saudi Arabia, they have acted in our interests when it was also in their interests, I can only think of a few very rare circumstances where Saudi Arabia remotely acted against its interests to help the United States. Maybe the very closest would be their support for our 2003 invasion of Iraq, but the Saudis had long been maneuvering against Saddam Hussein. Additionally in a post-9/11 world with Bush dropping bombs all over and it very obvious most of the 9/11 hijackers were Saudi nationals, I think they probably felt it was time they did whatever the U.S. said for fear of things going south. There is no real scenario like that at present. What is the U.S. going to do, abandon its relationship with Saudi Arabia and embrace KSA's chief enemy in the region...Iran? It just isn't realistic. Mutual benefit ties us together, and there is not a broad feeling that either party has to do things outside of that.

Note that the United States has ignored and snubbed a large number of Saudi requests and demands over the last decade when those demands didn't align with U.S. interests.