President Joe Biden has ordered a major release of oil from the nation’s Strategic Petroleum Reserve for the next six months. In an effort to bring down high fuel costs, the U.S. will free up to 180 million barrels, translating to 1 million barrels of oil per day. The fact that this is the largest release since the reserve was created in 1974 speaks volumes about Biden’s desperation.

 

The biggest release in the history will also reduce the country’s reserve to its lowest level since 1984. But the reserve was there for a reason. It was created following the energy crisis in the 1970s. The purpose of the reserve is for a supply-side emergency, such as a hurricane. As of March 25, the reserve held 568 million barrels, down from more than 700 million barrels at its peak in 2009.

 

Biden’s announcement marked the third time in 6 months he has tapped into America’s reserve stockpiles. This means the clueless president has no idea what he was doing. Did he realize the release of additional 1 million barrels per day of reserves, which needed to be replenished, is not enough to compensate for lost supplies from Russia (who produce more 11.3 million barrels every day)?

After his latest gambit to release 180 million barrels, the crude oil fell a mere 4.9%. Today, the international benchmark – Brent Crude Oil – is still trading above US$100 a barrel at US$105.59. President Biden has failed to hoodwink the markets, which did not respond accordingly. The oil market knew it was a political decision, not a real workable solution.

 

Clearly, Washington has underestimated and miscalculated the consequences of Russia-Ukraine war. Now that Ukrainian President Volodymyr Zelensky says he is no longer pressing for NATO membership, not only the U.S. and allies’ desire to expand NATO has failed, the war seems to have wrecked havoc to the U.S. and Europe as much as it did to Russia.

 

Domestically, Biden is under tremendous pressure as Democrats is on the brink of losing the November midterm elections. Even before the Russia-Ukraine war, the U.S. inflation hit record-breaking 7.5% in January 2022 – the highest since February 1982. The inflation skyrocketed again to 7.9% in February. And it’s not rocket science the March figures will be much uglier.

Likewise, European Union annual inflation was 6.2% in February 2022, up from 5.6% in January. A year earlier, it was just 1.3%. The latest numbers showed the Euro zone’s inflation in March hits another high – 7.5% – thanks to high fuel prices. Now, the EU leaders have admitted that not only there is economic damage from the invasion of Ukraine, but there could be a recession.

 

Hilariously, in the U.S., desperate Americans have been reduced to stealing gas by drilling holes on cars and trucks to drain the fuel tanks. The record high cost of fuel adds to the pain being felt by the American middle class. But Biden has blamed not only Putin for the energy problem, he has also blamed fellow American producers, warning them to immediately increase supply.

 

The White House blames the U.S. drilling industry for being quick to ask for concessions, but slow to open the spigot when consumers need it. Biden has even threatened to make companies pay fees for wells from leases that they haven’t used in years. But oil companies has blamed the problem on Biden’s tighter regulations and push for renewable energy, which in turn constrain output.

Biden administration shot its own foot when it recklessly banned import of Russian oil at a time when many U.S. oil producers are either waiting for government permits or could not start drilling due to lost of workers during the Covid-19 pandemic. Many companies had gone bust, despite a stockpile of 9,000 permits not being used. It’s harder to restart oil production once it has been shut down.

 

The U.S. president has only one option – visit Saudi Arabia and beg for forgiveness. The Oval Office should realize that only the de-facto leader of OPEC can help to ease the current high price of crude oil. Not even Venezuela and Iran, the American enemies whom the U.S. is trying to suck up, can compensate for reduced Russian oil exports in the short term.

 

Ramadan, the Muslim holy month of fasting and reflection, has begun – providing the best opportunity for Biden to visit the kingdom in order to repair the damaged relations between both nations. On Thursday (March 31), the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, confirmed they won’t boost oil production as demanded by the Western powers.

It was not a coincidence that Biden announced the release of 180 million barrels of oil on the same day the OPEC said they were sticking to their existing deal to gradually increase production. The U.S. president wanted to send a message that he has cards to play. But it is not working. And Biden should prepare to accept the reality that he may have to lose face in order to get help from Saudi.

 

Donald Trump had actually fixed Saudi resentment, which has been mounting for over a decade. During Trump’s visit, it was Saudi King Salman who was waiting on the tarmac to welcome the U.S. president, whereas the same monarch waited inside his air-conditioned palace for Barack Obama. Trump was even given 83 gifts, including a traditional sword dance by the Saudi King.

 

During Biden’s first year in office, however, he refused even to speak with Crown Prince Mohammed, the de-facto leader of the kingdom. The president then released the Central Intelligence Agency’s conclusion that the crown prince had ordered the 2018 murder of journalist Jamal Khashoggi. He promised to make a pariah out of Saudi Arabia over the gruesome murder.

Expressing Riyadh’s anger, Saudi Foreign Ministry officials said – “You criticize us for producing oil and call it dirty to please climate advocates and yet when you’re in trouble you turn to us and say, ‘Pump more’” There’s absolutely no reason whatsoever for the kingdom to increase production. All members of OPEC+, including Russia, are enjoying the high price of crude oil.

 

To make matters worse, the U.S. withdrew its most advanced missile defense system – THAAD (Terminal High Altitude Area Defense) – and Patriot missiles from Saudi Arabia last year despite persistent air attacks by Houthi rebels from neighbouring Yemen. It was only last month that Biden made a U-turn and resumed Patriot anti-missile interceptors to Saudi.

 

However, the White House has yet to reinstate Houthis to the U.S. terrorist list as demanded by Saudi. In fact, the U.S. president is considering lifting U.S. terrorism sanctions on Iran, the bitter rival of Saudi and the world’s leading state sponsor of terrorism. Even if Biden cannot lose face by kowtowing to Saudi, the U.S. is under pressure due to geopolitical reason.

The Kingdom of Saudi Arabia’s relations with China is getting stronger. After President Xi Jinping’s visit to Saudi Arabia in 2016, China purchases 1.8 million barrels of oil a day from the kingdom and is now Saudi’s largest trading partner. Beijing then welcomed Crown Prince Mohammed in 2019. Last month, Foreign Minister Wang Yi said that China and Saudi Arabia are “good friends and good brothers”.

 

Saudi has also expressed its interest in yuan-denominated futures contracts, known as “petroyuan”, something which China introduced in 2018 to compete with petrodollars. It might not shift overnight all its 6.2 million barrels a day of crude exports to Yuan from the dollar, but it would start the ball-rolling for other Arab nations to embrace Yuan as a tradable currency for oil because Saudi is OPEC de-facto leader.

 

Last month, Riyadh has invited Chinese President Xi Jinping to visit the kingdom, a trip that could happen as soon as May after the Ramadan. It’s a tactical move, therefore, for Biden to visit Saudi before Xi Jinping, taking advantage of the Ramadan as a cover as this is the holy month that Saudi is willing to host world leaders. But the holy month is also a double-edged sword.

Only a working visit is possible during Ramadan, meaning there will be no guard of honour, unlike Trump’s first foreign visit to Saudi where he received an official welcome ceremony, flanked by a herd of horsemen carrying Saudi and American flags. Of course, Biden will also not receive the gold medal – Collar of Abdulaziz al Saud – from King Salman, the kingdom’s highest civilian honour.

 

Arguably, Joe Biden’s visit would be a brief working visit similar to how former Malaysia Prime Minister Najib Razak was mistreated and humiliated by former US President Donald Trump in September 2017. Despite having paid millions to lobbyists to arrange for a visit to the White House, a political stunt to cleanse Najib of his 1MDB corruption scandal, the visit was a disaster.

 

Prior to the visit, which Najib planned to use to polish his credentials before the 2018 General Election, the disgraced Malaysian leader had claimed that he and Trump were golf buddies. When Mr Najib finally met Mr Trump, the boot-licking Najib had even made empty promises, pledging billions of dollars in investments to “Make America Great Again”.

Yet, despite US$20 billion investment bribes, Najib was granted a “pariah visit status” when photos emerged that he appeared to be interrogated by Trump and his top officials. Worse, an original plan to allow reporters into the Oval Office meeting between Trump and Najib was scrapped at the eleventh hour – the White House feared a photo-op with the Malaysian crook could damage Trump’s image.

 

Najib’s visit was not being honoured by a 19-gun salute and a military band by the US Ceremonial Guard, let alone a state dinner or any exchange of diplomatic gift, as according to the official protocol. Embarrassingly, there was also no high ranking U.S. official to receive Najib Razak at the Joint Base Andrews in Maryland. The customary joint press conference was also cancelled during Najib’s visit.

 

While a Biden’s visit to Saudi will definitely be less glory than Trump’s, it would be interesting to see if Biden will be accorded a visit as pariah as Najib. It’s not clear if Biden would want to have photos of him shaking hands with Crown Prince Mohammed splashed in news media. Such photos could be interpreted as the U.S. Commander-in-Chief eating humble pie, as well as Biden’s endorsement of Khashoggi’s murder.

 

Other Articles That May Interest You …

• Cracks In U.S. Influence – The Arabs’ Unthinkable Shifts To China & Russia In Defiance Of The Western Sanctions
• Pay Gas In Ruble Or Else – Europe In Serious Trouble As Putin Retaliates Against Western Sanctions
• Is U.S. Really That Powerful? – Zelensky Frustration Grows Over Biden Foot-Dragging In Helping Ukraine
• Bypassing US Dollar – India And Saudi Arabia To Turn To Chinese Yuan In Trades With Russia & China
• 3rd Time U.S. Says “No Saudi Donation” – FBI Confirms Najib Stole RM3.2 Billion, Riza RM1 Billion & Jho Low RM6 Billion
• From Wheat To Oil & Gas – How Russia Invasion Of Ukraine Affects Europe’s Food Supply, And Even Your Loaf Of Bread
• U.S. Unlikely To Start A War With Russia Or China – But The Bluffing Game Has Driven Them To Unite Against The U.S.
• China Creates Digital Currency – Here’s Why It’s A Big Deal To The World’s Economy, And A Big Problem For The U.S.
• Economic Destabilization – How China Prepares For American & Japanese Military Interference In Taiwan Conflict
• Xi Jinping Says “No Force Can Stop The Chinese”, Shows Nuclear Missiles Which Can Hit The U.S. In 30-Minutes
• Under Pressure, Trump Granted Najib A “Pariah Visit Status” Despite $20 Billion Investment Bribes

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April 3rd, 2022 by financetwitter

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