Saudi Arabia Calls OPEC+ Meeting
Mohammed bin Salman and Vladimir Putin, the architects of the oil price war, meet in Moscow. (Wikimedia Commons).
Saudi Arabia declared its intention to call an emergency meeting between the Organization of Petroleum Exporting Countries (OPEC) and its allies on April 2. This move comes in the middle of a burgeoning oil price war between Saudi Arabia and Russia.
Oil prices have remained stable throughout the past three years due to a pact labeled OPEC+, reports Vox. This pact includes the 15 oil-exporting countries represented by OPEC and their allies, including Russia. However, in an attempt to keep the price of oil high during the beginning of the COVID-19 pandemic, Saudi Arabia proposed that the OPEC+ participants collectively cut production by 1 million barrels per day. Russia declined, leading to dramatically increased oil production in both countries. Though Moscow’s reasoning behind its refusal is unclear, some observers have speculated that the lowering of oil prices was designed to hurt the US shale industry, according to the National Interest.
The impact of the price war has been substantial. On March 31, the price of oil hit an 18-year low, reports the Street. The share price of West Texas Intermediary (WTI), a U.S. oil benchmark, had dropped by 69 percent since the start of the year, as of April 2. This free-fall has gravely impacted the U.S. shale industry. Colorado-based Whiting Petroleum filed for bankruptcy on April 1, and experts warn that more companies will follow suit if prices continue to plummet, according to NBC.
The OPEC+ meeting succeeded in providing short-term economic relief with the share price of WTI rising by more than 30 percent. President Trump supported the Saudi-led effort, tweeting, “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry.”
Despite Trump’s optimism that this meeting will usher in the end of the oil price war, some energy experts doubt that Riyadh has international interests at heart. Samantha Gross, a fellow at the Brookings Institution, told Al-Jazeera, “US shale producers are their competitors. There’s no way the Saudis want to cooperate to save the US market.” For now, the White House is facing pressure to bail out the shale industry; however, the administration’s attempt to add a $3 billion provision for the shale industry onto the recent $2 trillion package to resuscitate the economy was denied by House Democrats, according to Al Jazeera.
The U.S. is considering alternative policy options. Six senators wrote to Secretary of State Mike Pompeo, expressing a desire to bolster U.S.- Saudi cooperation at the expense of OPEC. While the OPEC+ meeting may not end the oil price war, it shifted dynamics as the U.S. gravitates closer to Saudi Arabia, leaving Russia in the cold.