The future of the struggle to manage oil prices in the international market

Over the course of the period from July to November 2021, oil prices on the international market tended to rise, reaching $86 per barrel, which led to an inflationary wave worldwide.

This disturbed the European countries and the United States, as inflation rates reached 6% in America, and about 4% in the European Union.

Subsequently, US President Joe Biden called on the “OPEC Plus” gathering in early November 2021 to increase production quotas, in order to lower prices and calm the wave of inflation, but the result of the “OPEC Plus” meeting disappointed Biden and European leaders, as “OPEC Plus” announced It will continue at the same pace of the daily increase in production by about 400,000 barrels only.

Here, Biden found himself in a new challenge with the bloc of oil producers, and announced that he had other tools that he would use to calm oil prices, and that was on the sixth of November, which led to a decline in oil prices until Monday, November 22, to be the price of crude Brent is under the $80 ceiling.

But with America’s announcement that it will allow the use of the oil stockpile tool by about 50 million barrels, and that the policy of resorting to oil stocks will be implemented in cooperation with other major oil users, such as India, China, Japan and South Korea, these countries announced their readiness to employ various shares of their strategic stocks to interact with Biden call.

Opposite direction

Unexpectedly in the international oil market, oil prices tended to rise again on November 23 and 24, 2021, exceeding the $82 ceiling for Brent crude and about $78.5 for American crude. This led the US President to accuse the major oil companies of taking advantage of the crisis and raising prices.

The market is awaiting the outcome of the “OPEC Plus” meetings in early December 2021, and whether it will interact with the demands of the US President and major oil consumers, or will it continue its policy to achieve the goal of eliminating the increase in oil supply that characterized the market during the last period?

And if the decisions of “OPEC Plus” settle on applying the same rates of increase agreed upon in the current November for the rest of 2021, then we are facing a new administration within the producers’ side, so that the oil price equation will witness a strong struggle between its two parties (producers and consumers).

Producers feel that, since mid-2014, they have been subjected to great losses, which have made them in a bad financial position, especially those countries that depend on oil as a major source of their public revenues, or a major component of their commodity exports, and therefore feel that the time has come to recover some of their losses, especially after they have accumulated The negative repercussions of the Corona pandemic on the repercussions of the cheap oil crisis for nearly 8 years.

Political recruitment of the crisis

Estimates are still fluctuating regarding the future performance of global economic growth, between an optimistic view of a recovery in growth, and thus an increase in demand for oil, and fears of announcing the prospects of a return to a complete closure, in light of the increasing number of Corona virus infections in many countries.

But what is new this time is, “OPEC Plus” rejected the request of the US president of the bloc of producers, which is largely represented by “OPEC Plus”, not to gather Russia, the traditional rival and enemy of America and the West, as well as Saudi Arabia, who is not satisfied with its political leadership, represented by Crown Prince Mohammed bin Salman. .

This meeting between Russia and Saudi Arabia comes to achieve a kind of consensus within "OPEC Plus" to achieve common interests, to put pressure on both America and Europe. Russia has problems due to the economic sanctions imposed on it since 2014, after it occupied the Crimea region of Ukraine, in 2014.

It also plays roles that compete with America's orientations in the Middle East, and it wants to reach settlements that guarantee its placement on the map of international powers, as well as the realization of its economic interests.

Despite this Russian-Saudi alliance within OPEC Plus, recent history tells us that this alliance is fragile, and America can kill it through one of the cards it owns, especially towards Saudi Arabia. In April 2020, a Saudi-Russian dispute occurred, over the quantities of oil supplied. In the shadow of Corona, Russia did not respond to Ibn Salman’s demands, which led to what was known as a price war, as the price of a barrel of oil reached about $19 at that time.

The coming days may result in America seeking to dismantle this alliance, and rendering the "OPEC Plus" bloc ineffective in determining the path of prices in the international oil market, as it was doing in the "OPEC" bloc.

Especially since America has a paper to end Iran’s nuclear program file, and reaching a settlement for this file will enable Iran to change its position in “OPEC Plus” and request its entire export quota, which was available before sanctions were imposed on it in 2018, which is estimated at 3.5 million. barrels per day, while it is now only about 300,000 barrels per day.

The use of the Iranian paper and others within "OPEC Plus" would make America reach its goal of increasing the supply of oil, and thus calm prices in the international market, and cool the inflationary wave in its economy and the rest of the world's economies. Rather, it paralyzed the role of the "OPEC Plus" bloc in managing oil prices in the international market.

Fair trade goal

Western countries, America and other emerging countries that depend on exports often call for the sovereignty of free trade, but developing countries that depend on the export of raw materials, demand fair trade, to get a fair return for their wealth.

Oil is one of the most important economic resources for developing countries, and its share has an influential role in the global energy situation, but there are demands that oil not be used as a political card, for humanitarian considerations, such as the harsh winter experienced by European countries, or the heavy dependence of human civilization on oil and gas as the largest source of energy production.

And every time the developing countries engage in confrontations with America and the industrialized countries, they end with the victory of America and its allies, due to the fragmentation of the front of the developing countries, and the absence of a common agenda for their interests.

However, the energy problem in 2021 and beyond, which is accompanied by other problems in food, and the fragility of the global economic recovery situation, will represent a real test for the ability of the “OPEC Plus” bloc to play a historical role in rebalancing the oil equation in the international market, to be the interests of its two parties (producers). and consumers) are equal, or at least not oppress one party over the other.

In light of historical experiences, we can say that “the situation will end in favor of America”, not out of bias towards conspiracy theory or adopting a pessimistic view, but due to the fragility of the structure of the “OPEC Plus” bloc, the lack of a common agenda for the interests of its members, and the ease of America’s influence on the positions of the members of this bloc.