President Joe Biden is poised to ask oil-producing Gulf leaders to ramp up oil manufacturing when he visits Saudi Arabia. How way more can they produce and the way a lot of a distinction will it make?
RACHEL MARTIN, HOST:
With hovering inflation and excessive fuel costs, President Biden has toned down his ethical outrage over Saudi Arabia’s human rights file. Biden is in Saudi Arabia immediately the place he’s poised to ask oil-rich Gulf leaders there to maintain pumping extra oil, which might drive fuel costs down right here at dwelling. For extra, we flip to NPR’s Arezou Rezvani, who covers vitality. Good morning, Arezou.
AREZOU REZVANI, BYLINE: Hey, Rachel.
MARTIN: What are the possibilities the Saudis are going to ramp up oil manufacturing?
REZVANI: So OPEC has elevated its output in current weeks, however extra continues to be wanted. And this might be a fairly large ask from Biden. Relations between the U.S. and the Saudis have been strained for fairly some time now, and it wasn’t way back that Biden vowed to make Saudi Arabia a world pariah for ordering the homicide of journalist Jamal Khashoggi. But right here we’re a couple of years later, People are fed up with the excessive fuel costs. Midterm elections are developing and Biden is there to, sure, discuss regional safety points and in addition as a result of the Saudis are the most important oil producer inside OPEC. They’ve the ability to sway costs. I talked to Helima Croft about this. She’s the worldwide head of commodity technique at RBC Capital Markets. She says the Saudis actually have probably the most oil to spare in the intervening time, however even for them, there are limits.
HELIMA CROFT: Saudi Arabia is producing a bit over 10 million barrels a day. Their sustainable capability is 12 million. However do they wish to max out their spare capability? And the argument that they preserve making is that if we offer you our remaining spare capability, there can be no shock absorbers left on this market to take care of any future provide disruptions.
REZVANI: So disruptions may very well be one other geopolitical disaster. She pointed to renewed unrest in Libya, one other member of OPEC, for example or a pure catastrophe. So even when OPEC does enhance its manufacturing, it in all probability will not be by a lot.
MARTIN: The oil market relies on so many issues geopolitically, proper? I imply, simply clarify what different forces are at play proper now.
REZVANI: Properly, the inflation around the globe is driving fears of a world financial slowdown. That nervousness might put a lid on demand and preserve oil costs from climbing. However then there’s the difficulty of Russia. The newest spherical of Russian sanctions have not kicked in but. European international locations which have relied on their oil imports can be slicing again quickly. Limiting that oil in an already strained market, that would shoot costs again up. And in addition there isn’t any telling how Russian President Vladimir Putin will react or retaliate to the strain. So there’s lots nonetheless up within the air.
MARTIN: I imply, fuel costs right here have been so astronomically excessive, Arezou, however they’ve been dipping. Are you able to clarify why?
REZVANI: So there are a mix of things driving this. In China, COVID circumstances are on the rise once more. The prospect of lockdowns is slowing down demand in that main market. Then right here within the U.S., consumption has cooled a bit amid indicators that the worldwide economic system is slowing. However analysts say this reprieve may very well be brief lived as Western sanctions intensify on Russia later this yr.
MARTIN: So what are the president’s choices? If the Saudis say no, the place else can he look? What are the opposite choices to attempt to decrease or stabilize fuel costs?
REZVANI: Yeah, that is one thing that got here up in a dialog I had with oil skilled Daniel Yergin. He says the important thing to bringing down oil costs might not be within the Center East however proper right here at dwelling by means of the Fed and in ways in which might not be very comforting to listen to.
DANIEL YERGIN: Its goal is to battle inflation, however the collateral injury is financial development, and a slowdown within the economic system would scale back demand, and that will take among the strain off worth.
REZVANI: So mainly, it could take one thing as excessive and dramatic as slowing down the entire economic system to get fuel costs again below management.
MARTIN: NPR’s Arezou Rezvani. Thanks a lot.
REZVANI: You are welcome.
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