| As the US energy industry got hammered by both the impact of COVID-19 on global demand and a Russia-Saudi oil war, US President Donald Trump lit up the phones, making clear to both Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman (known by his initials “MBS”) that they had to stop the free fall in prices.
In an April 2 call, according to Reuters, Trump warned MBS that unless the Organization of the Petroleum Exporting Countries (OPEC) cut back on production, he might not be able to stop congressional legislation calling for the withdrawal of US forces from the kingdom.
Ten days later, Russia and OPEC cut production.
This all can probably be scored as both a win for US presidential diplomacy and a sign of the enduring centrality of Saudi Arabia in US energy and security policy, as the partnership enters a new, post-COVID-19 era.
Trump and MBS finish what Putin started
The oil price collapse and the COVID-19 crisis are linked at the start, as Daniel Yergin explains in Foreign Affairs. When China’s economy began to shut down in January and February with the early outbreaks of COVID-19, global demand for oil dropped by 6 million barrels per day. In March, Saudi Arabia proposed dramatic cuts in production to maintain price stability; Russia wanted to keep the previous OPEC+ agreement in place. They couldn’t agree, and both sides cranked up production. Prices fell from $56 per barrel in February to approximately $23 per barrel this past week — the lowest monthly average in years.
Putin also had his sights on dealing the US energy and fracking industry a setback. The United States had become a net energy exporter in 2019, but the decline in both demand and prices set back US energy production from its apex. The Energy Information Agency predicted the United States would be a net importer again in 2020. |