How 80 Years Old Joe Biden 'Broke OPEC' Despite Saudi Arabia's Rejection to Pump More Oil.
By Tony Bruce | Sunday, June 09, 2024 | 5 min read
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| Saudi Crown Prince Mohammed bin Salman and President Biden meet in Jeddah, Saudi Arabia, in July. SAUDI ROYAL COURT/REUTERS |
For six decades, the Organization of the Petroleum Exporting Countries (OPEC) held sway over global oil prices, significantly influencing American politics and the global economy. Recently, President Joe Biden has made notable strides in diminishing OPEC's control over the oil market. Despite a notable diplomatic setback when Saudi Crown Prince Mohammed bin Salman rejected Biden's call to pump more oil, Biden's strategic policies have still managed to curtail OPEC's dominance and reshape the rules of oil trading.
OPEC's Historical Influence
OPEC has long played a crucial role in controlling the global supply and price of oil. By coordinating production levels among member countries, OPEC could influence market conditions, leveraging its power to sway economies and politics worldwide, especially in oil-dependent nations like the United States.
Biden's Strategic Policy Initiatives
1. Boosting Domestic Production
Biden's administration has focused on boosting domestic oil production as a cornerstone of its energy strategy. By rolling back certain restrictions and providing incentives for drilling and exploration, the U.S. has increased its energy independence. This move has reduced the country's reliance on foreign oil, thus weakening OPEC's influence on the American economy.
2. Green Energy Transition
Biden has aggressively pushed for a transition to renewable energy. Significant investments in green technologies and ambitious carbon reduction targets aim to lower the long-term demand for oil. The push for electric vehicles, solar power, and wind energy are integral to this strategy, gradually diminishing the market power of traditional oil producers like OPEC.
3. Strategic Petroleum Reserve Releases
To mitigate the effects of oil price spikes and supply disruptions, Biden has effectively used the Strategic Petroleum Reserve (SPR). By releasing oil from the SPR at critical times, the administration has been able to stabilize prices and counteract OPEC's supply manipulations, thereby reducing the cartel's ability to control the market.
Diplomatic Maneuvers
1. Strengthening Alliances
Biden's foreign policy has emphasized strengthening alliances with key oil-producing nations outside of OPEC. By fostering stronger ties with countries such as Canada, Brazil, and Norway, the U.S. has diversified its oil supply sources. This diversification reduces the market power of any single cartel, making it more difficult for OPEC to unilaterally influence global oil prices.
2. Negotiating Supply Agreements
Biden has also secured favorable supply agreements through direct negotiations with both OPEC and non-OPEC countries. Leveraging the U.S.'s economic and political influence, these agreements ensure a stable supply of oil at competitive prices, providing a counterbalance to OPEC's traditional control over the market.
The Saudi Rejection and Its Implications
In a notable diplomatic setback, Saudi Crown Prince Mohammed bin Salman rejected Biden's call to increase oil production. Saudi Arabia, a key OPEC member, has historically played a significant role in balancing global oil supply and prices. This rejection underscored the limits of diplomatic influence and highlighted the complexities of global oil politics.
Despite this setback, Biden's broader strategy has remained effective. The increased domestic production, strategic use of the SPR, and strengthened alliances have mitigated the impact of Saudi Arabia's decision, ensuring that the global oil market remains stable and less dependent on OPEC's actions.
Impact on Global Oil Industry
1. Diversified Supply Chains
Biden's policies have led to a more diversified global oil supply chain. Increased domestic production and stronger alliances with non-OPEC producers have made the global oil market more resilient to the actions of any single cartel, contributing to greater stability and predictability.
2. Competitive Market Environment
Reducing OPEC's market share has fostered a more competitive environment. Independent oil producers and smaller nations now have greater opportunities to participate in the global market, encouraging innovation and efficiency within the industry.
3. Acceleration of Renewable Energy Adoption
Biden's green energy initiatives have accelerated the global shift towards renewable energy. This transition reduces the demand for oil and stimulates economic growth and job creation in the renewable energy sector, further diminishing the influence of oil-producing cartels like OPEC.
President Joe Biden's strategic policies and diplomatic efforts have significantly diminished OPEC's influence over the global oil market, even in the face of Saudi Arabia's refusal to pump more oil. By boosting domestic production, promoting renewable energy, and securing strategic supply agreements, Biden has fostered a more stable, diversified, and competitive oil market. These changes mark a significant shift in the global energy landscape, reducing OPEC's longstanding dominance and rewriting the rules of oil trading. As the world continues to move towards sustainable energy, the legacy of these changes will shape the future of the oil industry for decades to come.
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