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The Big Picture

Saudi Arabia Wields Its Clout

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  • Rising oil prices and the Ukraine crisis’ broader energy shock have prompted Washington to reset relations with Saudi Arabia.
  • US President Joe Biden’s visit this week is meant to smooth the relationship, particularly with Saudi Crown Prince Mohammed bin Salman. Additional Saudi oil supply is expected to be limited.
  • Behind the visit is a fundamental shift in energy dynamics, after a combination of upstream underinvestment, geopolitical pressures and demand growth restored and magnified producers’ clout.

When Biden took office 18 months ago, he faced a very different energy narrative. Oil supply was abundant, demand had been savaged by the Covid-19 pandemic and climate change was top of the policy agenda. Oil markets barely blinked when Opec capacity was taken out by drone and missile attacks, civil conflict or sanctions. The International Energy Agency’s May 2021 report on a net-zero pathway cast doubt on the need for new oil developments, and UN climate talks in Glasgow in November largely sidelined the oil industry. Biden felt able to focus on climate and snub the Saudi crown prince over human rights concerns.

Topics:
Opec/Opec-Plus, Security Risk , Elections, Macroeconomics
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