Biden threatens ‘consequences’ for Saudi Arabia after OPEC cut, but his options are limited
US President Joe Biden and Saudi Crown Prince Mohammed bin Salman arrive for the family photo during the Jeddah Security and Development Summit (GCC+3) at a hotel in Saudi Arabia’s Red Sea coastal city of Jeddah on July 16, 2022.
Mandel Ngan | Afp | Getty Images
President Joe Biden is angry at Saudi Arabia for its decision to slash oil production along with its OPEC allies against U.S. wishes, and he’s made no secret of it.
With the global economy on a knife-edge and energy prices high, Washington sees the kingdom’s move – which it made in coordination with Russia and other oil-producing states – as a snub and a blatant display of siding with Moscow.
The oil producer group in early October announced its largest supply cut since 2020, to the tune of 2 million barrels per day from November, which its members say is designed to spur a recovery in crude prices to counter a potential fall in demand.
For this, Biden said in an interview with CNN on Tuesday that there would be “consequences.” He did not go into further detail as to what those consequences might be.
But what are the Biden administration’s options, and could they backfire?
Weapons and anti-trust laws
The Saudi-U.S. relationship was founded, broadly speaking, on the principle of energy for security. Washington has since the 1940s provided billions of dollars in military and security aid to Saudi Arabia. But in recent years, and particularly since the Obama administration began making diplomatic inroads with Iran, Riyadh feels that the U.S. commitment to its security has waned.
“The truth is, neither side has been holding up their end of the bargain for nearly 10 years now,” Michael Stephens, an associate fellow at the Royal United Services Institute in London, told CNBC.
“And what you’re seeing, I think, are permanent fractures in the relationship that are based on the fact that neither side really sees as much strategic benefit in the other as they did 20 years ago,” Stephens said, adding that Saudi Arabia’s OPEC oil production cut “is a reflection of that.”
The potential “consequences” Washington can put into action include cutting its military support to the Saudi kingdom, and going after OPEC with U.S. laws.
A file photo of cannisters containing Patriot missiles to intercept missiles fired at Saudi Arabia or its neighboring countries.
Greg Mathieson | Mai | The LIFE Images Collection | Getty Images
Indeed, just one day before Biden’s comments, Sen. Bob Menendez, D-N.J., chairman of the Senate Foreign Relations Committee, demanded that the U.S. immediately halt all cooperation with Saudi Arabia — including weapons sales.
“The United States must immediately freeze all aspects of our cooperation with Saudi Arabia, including any arms sales and security cooperation beyond what is absolutely necessary to defend U.S. personnel and interests,” Menendez said in a statement.
In an earlier interview with CNBC, Sen. Chris Murphy, D-Conn, asked, “What’s the point of looking the other way when the Saudis chop up journalists and repress political speech inside Saudi Arabia if when the chips are down, the Saudis effectively choose the Russians over the U.S.?”
Even Sen. Bernie Sanders, I-Vt., weighed in, demanding in a tweet that, “If Saudi Arabia, one of the worst violators of human rights in the world, wants to partner with Russia to jack up US gas prices, it can get Putin to defend its monarchy. We must pull all US troops out of Saudi Arabia, stop selling them weapons & end its price-fixing oil cartel.”
Beyond withholding military aid, there are legal channels the U.S. government can pursue.
One is the NOPEC bill, which stands for No Oil Producing and Exporting Cartels. This would classify OPEC as a cartel and subject its members to anti-trust legislation.
Something long discussed by lawmakers, the bill is designed to protect U.S. consumers and businesses from artificial oil spikes.
It passed a Senate committee in early May and hasn’t yet been signed into law, but could expose OPEC countries and partners to lawsuits for coordinating supply cuts that raise global crude prices.
The bill would still need to be passed by the full Senate and House and signed into law by the president to go into effect. OPEC ministers have previously criticized the NOPEC bill, warning it would bring greater chaos to energy markets.
Consequences for the U.S. – and for crude prices
The decision by OPEC+ – which constitutes OPEC and its non-OPEC allies like Russia – to cut its output “underscores the extent to which the Biden administration has lost its ability to influence Saudi OPEC+ policy,” said Torbjorn Soltvedt, principal MENA analyst at risk intelligence firm Verisk Maplecroft.
“The White House has few good options despite Biden’s warning of ‘consequences’ after the cut,” he said, noting U.S. lawmakers’ threats of anti-trust legislation and removal of U.S. military assets from Saudi Arabia.
While both courses of action would send a clear message, this could backfire for both the U.S. and for crude prices.
“Both of these options would threaten to break already fraught relations, which in turn would put even greater upward pressure on oil and fuel prices,” Soltvedt said.
“In short, a breakdown in U.S.-Saudi relations would mean a higher Middle East risk premium for the global oil market and higher oil and fuel prices,” he explained. “This is the opposite of what the White House is trying to achieve ahead of midterm elections in November.”
It’s also key to note that the 2 million barrel per day cut will not in fact be as big as that headline figure; several member states have already been far short of their individual production ceilings, and Iraq for instance has indicated it will be producing more than its assigned quota.
Still, many American politicians have long been out of patience with the nature of the U.S.-Saudi relationship, especially as U.S. imports of Saudi oil have shrunk over the years and more than 80% of the Middle East’s crude exports now go to Asia.
This has made a growing number of U.S. lawmakers question, Soltvedt said, “why the American navy should underwrite the security of Middle Eastern oil exports when those barrels are increasingly going East rather than West.”
— CNBC’s Sam Meredith contributed to this report.
Leading electric vehicle analyst, author, and industry thought leaders Loren McDonald and Bill Ferro stop by Quick Charge to discuss EV Adoption’s acquisition by Paren, the “crisis” of EV charging reliability, and the real state of the EV market.
Depending on who you listen, EVs are either driving brands to record growth and are about cross that critical 10% of the overall market nationwide, or the future is bleak, the market is down, and EVs just aren’t selling. What’s really going on? Loren and Bill (probably) have some answers.
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Chevy EV owners in Texas who have Reliant as their electric utility can now charge for free at night with renewable energy.
Over 150 Chevrolet dealerships across Texas are now offering the Reliant Free Charge Nights plan to new EV buyers. With Free Charge Nights, customers can offset their charging costs by receiving credits for electricity used between 11 pm and 6 am. The plan is powered entirely by renewable energy, thanks to the purchase of renewable energy certificates (RECs).
Rasesh Patel, president of NRG Consumer, says the plan is about making power personal: “We’re excited to help Chevrolet EV drivers offset the cost of charging their vehicle all while having access to a renewable electricity plan.”
This collaboration aims to make EV adoption more appealing by making charging cheaper and greener. GM Energy’s chief revenue officer, Aseem Kapur, emphasized that partnerships like this help build the ecosystem needed to support an all-electric future: “The Reliant Free Charge Nights plan is a great example of how an automaker and an energy company can work together to make EV adoption an easy decision.”
Existing Reliant customers can also sign up for the Free Charge Nights plan. To get started, Chevrolet EV owners need to designate their vehicle on the GM Energy Smart Charging Portal before enrolling in the plan.
Reliant Energy, a subsidiary of NRG Energy, serves over 1.5 million customers in Texas, making it one of the largest electricity providers in the state.
Read more: Texas to get 1 GW AI-powered virtual power plant, enough to power 200,000 homes
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Texas is about to get a major power boost – a new AI-powered virtual power plant (VPP) delivering capacity equivalent to 200,000 homes during peak demand.
NRG Energy is teaming up with Renew Home to bring nearly 1 gigawatt (GW) of capacity to the Texas grid by 2035, aiming to make it more resilient while helping residents save on energy costs.
The new VPP will rely on hundreds of thousands of smart thermostats and other connected home devices, making use of AI technology provided by Google Cloud. These devices, like Vivint and Nest smart thermostats, will be offered to eligible customers at no cost. By automating HVAC adjustments, they help shift energy use to when electricity is cheaper, cleaner, and less strained.
NRG and Renew Home have big plans for the VPP. Starting in spring 2025, the companies plan to roll out the program across Texas, installing these smart thermostats in homes served by NRG’s retail electricity providers. Eventually, they plan to add home battery storage and EVs to expand the power plant’s capabilities.
Texas has faced record-breaking energy demands, with peak usage hitting 85 GW in 2023. As the state’s population grows and extreme weather becomes more frequent, VPPs like this one could play a key role in stabilizing the grid. VPPs aggregate a lot of small-scale energy resources, from smart thermostats to home batteries, and use them to help balance supply and demand during times of high stress on the grid.
This nearly 1 GW VPP will be one of the largest of its kind in Texas. NRG’s president of consumer operations, Rasesh Patel, calls it a “pivotal step” for improving customer experience while making Texas’ energy infrastructure more sustainable and resilient.
In addition to Renew Home, NRG is working with Google Cloud to maximize the power plant’s effectiveness. Google Cloud’s AI and analytics tools will help predict weather conditions, forecast renewable generation, and optimize energy usage, all of which will help make energy management smoother for both customers and the grid.
Ben Brown, CEO of Renew Home, said:
NRG’s commitment to creating a more resilient and sustainable energy future while also making electricity bills more affordable makes them an ideal partner for co-developing this unique VPP program.
This initiative raises the bar for future-proofing our electricity infrastructure and delivering cost savings to customers.
Read: Chinese solar giant Trina sells its Texas factory a week after it opens
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Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*
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