Nearly six months after taking office, US president Joe Biden has finally noticed Opec. Rising gasoline prices, and the potential gift they present to his Republican opponents, have helped focus his gaze, and his team has reached out to Opec+ to resolve a continuing row over output policy. But tense relations with Saudi Arabia give Biden less scope for influencing the producer group than recent US presidents.
After a spat between the Saudis and the UAE disrupted discussions on Opec+ production policy earlier this month, US officials have been urging members of the alliance to agree on a proposal to increase output, the White House said this week. Washington wants "a compromise solution that will allow proposed production increases to move forward", and says that global spare capacity is sufficient to prevent significant price hikes.
Every US president since the 1970s has had to master the art of simultaneously criticising Opec for a domestic audience while maintaining cordial relations with Riyadh over the delicate business of managing oil markets. This has typically involved asking Opec to increase output, but it is almost a decade now since Washington has had to lobby Opec to lift production in response to rising domestic gasoline prices. The last successful US intervention to increase oil supply came in November 2018, when Saudi Arabia and the UAE co-ordinated to boost volumes as former president Donald Trump's administration reimposed sanctions on Iran.
Trump and his advisers were also closely involved in getting the Saudis and Russia aligned to forge the new Opec+ pact in April 2020. Biden's administration had been taking a more hands-off approach to dealing with the producer group, but higher gasoline prices — at levels last seen in 2014 — have given Republicans an opening to criticise his broader energy transition policies (see chart). And such criticism matters, because Biden's ambitious legislative plans — covering climate change, tax policy and vast infrastructure spending — depend on approval from a Congress where the Democrats have only the thinnest of majorities.
The art of the deal
The White House sees keeping energy prices affordable for consumers as a top priority, it says by way of explaining its outreach to Opec. Biden clearly has little scope for blaming Opec for limiting supply in the short term, given a domestic energy policy agenda that could do exactly the same for US oil output in the long term. But influencing the group will require deal-making and compromises of the sort for which he criticised Trump, particularly with respect to Saudi Arabia. US-Saudi relations remain tense, a legacy of Riyadh's perceived bias toward Biden's predecessor and a Saudi-led military campaign in Yemen that upset previously bipartisan US support for Opec's largest producer.
Unlike Trump, Biden shows no willingness to get personally involved in cajoling Opec to reach a compromise. Ending Saudi involvement in Yemen's civil war, as well as regional security issues, still dominate talks with Riyadh, most recently on 6-7 July, when Saudi deputy defence minister Prince Khalid bin Salman visited Washington. Riyadh's hopes that US-Iranian talks could be expanded to include Tehran's missile programme look unlikely to be satisfied. Iran's president-elect, Ebrahim Raisi, has ruled out further deals with the US, and Washington acknowledges that such agreements would require concessions it may be unwilling to make.
Iran is Biden's potential trump card in getting more Opec oil on the market, but his promise to restore the Iran nuclear deal is proving difficult to implement. Washington and Tehran have resorted to brinkmanship since the most recent round of talks concluded last month, and Iran has not yet extended a temporary monitoring deal with UN nuclear watchdog the IAEA that expired on 24 June.
