When presidential candidate Joe Biden released his “Plan for a Clean Energy Revolution and Environmental Justice” on July 14th, he ensured that Russia, Saudi Arabia and the rest of the world’s oil producers will be rooting for him to win the election on November 3rd. Russian president Vladimir Putin, Saudi King Salman and his son Mohammed (MbS) need higher oil prices to provide for their countries and accumulate their own wealth. A Biden presidency is their best bet for high prices.
I wrote almost a year ago that Russia and Saudi Arabia secretly want a Democrat candidate to win the presidency. “Both countries have economies that rely on the production and sale of oil and natural gas. In Russia, the oil and gas sector contributes almost 40% of national revenue and more than half of the exports. In Saudi Arabia, the oil and gas sector contributes about half of the country’s GDP and 70% of its exports. The national oil company, Saudi Aramco, also contributes around 60% of the government revenue, and the government employs almost 70% of all working Saudis.”
Today, global oil prices are even lower. At the time the above quote was written, Brent, the international benchmark, was trading around $60 per barrel, but now it is barely above $40 per barrel after trading much lower in March, April and May. I wrote in February that the situation for the Russian and Saudi rulers could, “become politically precarious if the prices fall further. And those prices very well may fall if the global economy slows or the Coronavirus outbreak persists.” Well, those thing happened. As I wrote then, “they don’t just need to stabilize oil prices, they need to raise them.”
It is even more important now than it was pre-coronavirus for oil producing nations to see the price of oil rise in the near future. The ideal situation for them would be to see the prices in triple digits, which they last saw in 2014. The easiest way to achieve that may be to compel the U.S. to cut production. U.S. production currently seems to have leveled off at 11 million barrels per day (mbpd) following a pandemic-induced drop. At the end of February and beginning of March, U.S. production was at a record high of 13.1 mbpd. The current 11 mbpd number is not low enough to get the price of oil up; Russia and Saudi Arabia need further U.S. cuts.
Originally, it seemed that Biden was not a good candidate for the kind of environmental policies that would help Russia and Saudi Arabia. Biden appeared to have the most limited policies on energy among the major Democrat candidates. In September, I wrote, “Former Vice President Joe Biden was relatively limited in his claims, saying only that he would stop, ‘oil drilling or gas drilling on federal lands.’ In other words, he committed to no new wells on the vast federal lands.” That is not much, considering most of the others said they would ban or consider banning fracking, and eight candidates committed to ending offshore drilling.
Even now, Biden doesn’t say much about U.S. oil production. The long webpage devoted to his new policy does not mention fracking or hydraulic fracturing at all. “Shale gas” is only mentioned as a cost comparison for hydrogen. Offshore oil drilling off of the lower 48 states is not mentioned at all except to tout past accomplishments of the Obama administration. However, he does distinguish himself significantly from President Trump, under whom U.S. oil production rose more than 33% by this time last year. Biden asserts that on the first day in office, he would use the national parks and monuments authority of the president to ban, “new oil and gas permitting on public lands and waters.”
Biden may not have plans as strict as some of his past competitors, but his stances are surely harsher toward oil production than Trump’s. Moreover, his administration is bound to be staffed with personnel of a different mind-set than the laissez-faire Trump crowd that promotes massive U.S. oil production, even on federal lands, and few regulations. The EPA and the Department of Interior in a Biden administration would make it more difficult for oil companies to explore, drill new wells and transport much of the oil that is produced.
Russia, Saudi Arabia and their OPEC and other oil-producing countries all know this. For much of the first decade and a half of the twenty first century, they saw oil prices around or above $100 per barrel. Now, oil is barely staying above $40. It hasn’t come close to approaching triple digits for almost 6 years. Russia, Saudi Arabia and others have tried to manipulate the market to raise prices through OPEC and the larger OPEC+ group, but they have failed time and again. It seems the size of U.S. shale production weighs too heavily on the price of oil. Those countries can only hope for a force that brings U.S. production down. Right now, they must be hoping that a Biden win would do that for them.