WASHINGTON — As a candidate, Joe Biden vowed to make Saudi Arabia a pariah for the 2018 murder of journalist Jamal Khashoggi. Now, as a president dealing with record high gas prices, Biden is turning to the oil-rich kingdom for help.
Despite his deep-seated concerns about Saudi Arabia’s human rights abuses, Biden will visit its leaders next month, the White House said Tuesday, in the latest urgent attempt to rein in what is a major source of soaring inflation and also of his sagging approval ratings.
The announcement of the trip drew criticism from some as pandering to murderers, but Biden’s determination to go anyway demonstrates how few options he has to bring down gas prices as they topped $5 a gallon nationwide for the first time ever last week.
While Biden has stressed he has a plan to reduce oil prices, including releases from petroleum reserves in the United States and other nations as well as a call for refiners to boost production, much of the soaring prices are due to unique structural factors — the effects of the pandemic and Ukraine war on the global markets — that a president has little power to address.
“COVID is at the root of this,” said Patrick De Haan, head of petroleum analysis for GasBuddy, which tracks gas prices. “The overall increase in the price of oil has very little to do with the president today.”
Oil production cratered during the pandemic lockdowns in early 2020, a drop in demand so severe that at one point the cost of a barrel fell far below zero. The economic rebound was quicker than expected, leaving oil companies scrambling to restart wells and ramp up production, analysts said.
As demand returned, the shortfall caused prices to rise. Then the Russian invasion of Ukraine in February further strained supply as the United States and its allies imposed sanctions on Vladimir Putin’s regime. Russia is the world’s third-largest oil producer, behind the United States and Saudi Arabia.
“The supply constraints have been more significant than they have been since the ‘70s,” said Kaushik Deb, senior research scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.
Gas prices jumped 48.7 percent over the 12 months ending in May, according to the Bureau of Labor Statistics. That was a major factor in the consumer price index increasing 8.6 percent over the same period, the fastest rate of inflation in four decades, as higher fuel prices increase costs for shipping all kinds of products.
The same problems caused prices elsewhere to rise: The annual rate in the European Union hit 8.1 percent last month, with the figure in the United Kingdom even higher at 9 percent.
Despite his limited ability to meaningfully lower gas prices, Biden has stressed he is taking steps to do so. Many Americans expect him to fix gas prices, which are the most visible manifestation of inflation for most people.
“I have a plan to bring down the cost of gas and food. It’s going to take time,” Biden told the convention of the AFL-CIO organized labor coalition in Philadelphia on Tuesday. He noted the average gas price had increased by about $1.74 a gallon since Putin invaded Russia.
Republicans point out that gas prices were rising before the Ukraine war and blame Biden’s policies. They argue the $1.9 trillion American Rescue Plan Act helped fuel inflation by injecting too much money into the recovering economy, a point many economists now acknowledge. And Republicans argue Biden’s push for more clean energy to counter climate change and his decision to revoke a key permit for the Keystone XL pipeline have limited US oil production.
“We have sky high gas prices, sky high food prices, and the Democrats still want to keep American energy in the ground,” said Senator John Barrasso, a Wyoming Republican.
But Biden’s policies have had little to do with the decline in US energy production from its pre-pandemic peak, De Haan said. The COVID lockdowns, which kept people at home and their cars in the driveway, were by far the main cause of lower oil production, he said.
“It would be akin to Apple suddenly selling very few iPhones overnight. . . . Oil companies slowed production down,” he said.
US crude oil production plunged 8 percent, the largest drop on record, to an average of 11.3 million barrels a day in 2020, according to the US Energy Information Administration. Production stayed roughly the same at 11.2 million barrels a day in 2021 but has been ramping up and the EIA forecasts it will set a new record next year.
Limited capacity at refineries has also added to price pressures, but that too is catching up. Moreover, demand hasn’t declined as it usually would with high prices because people are eager to travel with COVID case counts low, De Haan said.
Biden’s policies haven’t constrained production, analysts said. The Keystone XL pipeline wasn’t expected to be finished until next year, so its cancellation hasn’t kept oil off the global market. But Biden’s comments about the need to move to clean energy could be constraining oil companies from investing in future production by creating uncertainty, De Haan said.
“It’s a challenging climate to be in when the president has not hidden the fact that he’d like the nation to transition away from fossil fuels,” De Haan said.
Oil producers also are feeling heat from shareholders to avoid overextending themselves. A March survey by the Federal Reserve Bank of Dallas found 59 percent of industry executives believe “investor pressure” to be disciplined on capital expenditures is the main reason why publicly traded oil companies are restraining increases in production despite high prices.
In Biden’s letter to refiners Wednesday, obtained by the Associated Press, he noted their profits have tripled as the Ukraine war is raging and said he’s prepared to use emergency authority to increase refinery capacity. Biden also has tried to increase the amount of oil in the global market through petroleum reserve releases. But there’s still not enough to meet demand, so he is now expected to urge Saudi Arabia to produce more.
Saudi Arabia and other oil-producing nations in the OPEC+ group agreed this month to boost production. And Biden’s visit, part of a Middle East summit the Saudis are hosting, could lead to more production. The Saudis are one of the only major oil producers that still could increase output, Deb said.
But some Democrats are concerned about Biden engaging with the Saudis even though his administration released an intelligence report last year that said Saudi Crown Prince Mohammed bin Salman approved the assassination of Khashoggi, a Washington Post columnist who had been critical of the regime.
White House press secretary Karine Jean-Pierre said Tuesday that energy is but one of the issues Biden will discuss with leaders of Saudi Arabia, a nation she described as an important strategic partner in the region. Human rights will be another one, she said, and the administration is “not overlooking any conduct that happened before the president took office.”
But some Democrats questioned the move.
“President Biden should not allow Mohammed bin Salman to get away with murder by giving him an audience without conditions during his upcoming trip to Saudi Arabia,” Senator Ed Markey, a Massachusetts Democrat, said in a statement. Those conditions should include an “admission of wrongdoing for the murder of Khashoggi” by bin Salman, Markey said.
Markey added that “the long-term antidote to high gas prices as a result of Putin’s illegal war in Ukraine can’t be to turn to another authoritarian government, Saudi Arabia, to fuel the gas tanks of the world. The cure to America’s addiction to foreign oil is to invest in a clean energy revolution.”