Was OPEC's snub just the beginning?

Presented by Chevron: Your guide to the political forces shaping the energy transformation

Oct 06, 2022 View in browser   By Arianna Skibell Presented by Chevron The sun sets behind an idle pump jack near Karnes City, Texas. | Eric Gay/AP Photo, File It was a gentleman's agreement. Saudi Arabia exported barrels of oil around the world, and the United States offered security guarantees to the kingdom. But on Wednesday, OPEC — the Saudi-led cartel of oil-producing countries — announced it would make deep cuts to oil production, despite the Biden administration lobbying for the exact opposite. The move highlights a new dynamic at play that could weaken Saudi-U.S. ties and scramble traditional power relationships in global oil markets. The White House quickly threatened to bring an antitrust suit against OPEC and accused the oil cartel of aligning with Russia, which stands to benefit from the cuts. Members of Congress have proposed cuts in military assistance to the kingdom as fears mount over rising gasoline prices and, let's be honest, midterm election results. Strained relationship The Saudi-U.S. relationship has faced increasing political strain in recent years, as POLITICO's E&E News reporter Benjamin Storrow notes in a story today . The kingdom was none too pleased when the Obama administration supported protesters during the Arab Spring. Relations didn't improve when, as a presidential candidate, Joe Biden pledged to make Saudi Arabia a "pariah" after its murder of Washington Post journalist Jamal Khashoggi. Saudi Arabia also has new friends. Its ties to Asia have become more important, and the United States is far less reliant on Gulf oil production than it once was. "The market has moved on, things have changed a lot," Ben Cahill, a senior fellow at the Center for Strategic and International Studies, told Ben. Russia's at it again  OPEC officials said their decision to cut production is an effort to provide more stability in the market ahead of a potential recession. But some analysts say the timing and circumstance of the announcement implicate Russia. The European Union is advancing a proposal to cap the price of Russian oil to punish the Kremlin for invading Ukraine. But the cap threatens OPEC's ability to direct oil markets. OPEC announced it would cut production in a meeting featuring a Russian deputy prime minister, perhaps a sign of its alliances. The move undermines U.S. and European efforts to curtail Moscow's enormous energy revenue while Europe battles surging prices triggered by the war with Ukraine. Meanwhile, the threat of climate change pervades the background. The latest oil chess move comes as the U.S. and Europe are plotting a shift away from fossil fuels, which could pose an existential crisis for OPEC members that rely on the sale of crude.   Listen to today's POLITICO Energy podcast Today in POLITICO's energy podcast: Ben Lefebvre breaks down why OPEC is cutting oil production and how the Biden administration is responding. tweets worth reading Sen. Bernie Sanders' (I-Vt.) foreign policy adviser, Matt Duss, has some suggestions for dealing with OPEC's decision to cut oil production.   A message from Chevron: At Chevron, we believe the fuels of the future can help power a brighter future. Find out how we're working to increase our hydrogen fuel production to help make heavy-duty transport lower carbon.   Power Centers President Joe Biden speaks Wednesday after touring an area impacted by Hurricane Ian in Fort Myers Beach, Fla. | Evan Vucci/AP Photo Climate change is here. Now what? For years, advocates sidelined the idea of adapting to a warming world, viewing it as a distraction from the task of reducing greenhouse gas emissions. But after the deadly hurricanes last week, President Joe Biden is emphasizing the need for climate adaptation, writes Scott Waldman. But few leaders in Washington have adequately prepared for the real costs of climate change by supporting climate adaptation, which means each year, adaptation gets harder and more expensive. Southern considerations A federal proposal intended to jump-start development of long-distance power lines in the Southeast to carry wind and solar power to urban areas has pitted utilities against environmental groups, writes Miranda Willson. At the heart of the issue are different frameworks for how to transmit electricity across the United States. Winter is coming The organization that oversees the U.K.'s power network is warning that British households could face a series of power cuts this winter if energy supplies are constrained, writes Matt Honeycombe-Foster. The National Grid is drafting a plan to encourage businesses and consumers to use power outside of peak demand periods, amid the Europewide squeeze on energy supply worsened by Russia's invasion of Ukraine. In Other News A pre-production Ford F-150 Lightning is shown in Bruce Township, Mich. | Paul Sancya/AP Photo Creeping $$: Ford's electric F-150 Lightning truck gets a higher starting price — again. Costs and benefits: The International Monetary Fund says taking swift action to achieve a 25 percent cut in greenhouse gases by the end of decade will hit growth, but it will cost less than failing to act. Question Corner The science, policy and politics driving the energy transition can feel miles away. But we're all affected on an individual and communal level — from hotter days and higher gas prices to home insurance rates and food supply. Want to know more? Send me your questions and I'll get you answers.   A message from Chevron:   Subscriber Zone A showcase of some of our best subscriber content. A Utah park ranger walks in areas exposed by receding waters at the Great Salt Lake. | AP Photo/Rick Bowmer Drought has gripped the Northern Hemisphere, from China to Europe to the U.S., and scientists say global warming made it 20 times more likely to occur. Florida's largest utility says few of more than 35 million solar panels were damaged by Hurricane Ian. Multiple oil and gas trade associations used the OPEC+ announcement to advocate for more domestic production. That's it for today, folks! Thanks for reading.   A message from Chevron: Energy demand is growing. At Chevron, we believe that demand for lower carbon hydrogen fuel could more than triple by 2050. That's why we're working to grow our hydrogen production to 150,000 tonnes per year by 2030 to help make heavy-duty transport lower carbon. Because we believe the future of energy is lower carbon. And it's only human to reach for it.     Follow us on Twitter Arianna Skibell @ariannaskibell   Follow us

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