After the drama of the last OPEC+ meeting in October and the decision of the cartel to cut production by a headline 2 million barrels per day, next Sunday’s meeting is predicted by some to be a snoozer.
To start, it will be a Zoom meeting, so there won’t be those oil analysts and pesky journalists hanging around on the famous stairwell, tweeting the latest buzz, while waiting for the meeting to end. The prediction, as of now, is that there will be little or no change in production totals. The oil price is up a bit — the closely-watched Brent crude is trading in the mid-$80s. That’s still high for us consumers but Wednesday’s cautious prediction by Federal Reserve chair Jerome Powell, that interest rate hikes could be scaled back, gives an almost positive shading to the U.S. economy.
But slow down and take some deep breaths. The world is still in a diplomatic mess led by Vladimir Putin’s mischief and Ukraine’s stubborn resistance. China is wracked by COVID. Europe is facing a dark and cold winter caused by energy shortages, and here at home, politics are still hugely divisive, and many are facing real economic hardship. Spring is a long way off.
Next week the West will introduce price-capping on Russia crude oil exports, meaning, theoretically, that Russia revenues will be cut. The effectiveness of this measure is debatable. Already, various countries outside Europe have indicated they don’t want to pick a fight with Moscow. Russia will surely retaliate. It already has cut back supplies of natural gas to Europe, making the point dramatically with the not-very-mysterious underwater detonations that cut the seabed Nord Stream pipeline in the Baltic Sea. As the Financial Times noted: “The Russians have every intention to make this winter as miserable as possible for the west to make us reconsider our support for Ukraine.”
But beware of sudden earthquakes, both political and actual, as a 5.7 shudder in the Persian Gulf on Wednesday evening reminded people living in tall buildings in Abu Dhabi and Dubai. Although the quake was in a relatively remote part of Iran, away from the country’s oil and gas fields, much of the area is an earthquake zone.
There is also the important question, “How is it all going to end?” Some have suggested that Iranian oil exports should be less sanctioned so that Tehran’s barrels can be used to undermine Russia’s receipts. The notion is not as absurd or fanciful as might be initially thought. Later this month, Chevron is expected to send its first crude shipment from Venezuela to the U.S. under a license from the Biden administration.
Is all this a new reality or just unreal? A possible ingredient to arguing the balance is that the world has been distracted by the soccer World Cup being played in Qatar. While soccer is hardly an American sport, the U.S. team is still in the competition after finishing second to England in its group. The final itself is not until Dec.18. OK, no-one expects the U.S. team to get that far but watching the games is somehow obsessive for many people.
For example, the Saudi team isn’t strong and isn’t through to the next round, but its de facto leader, Crown Prince Mohammed bin Salman, dropped out at the last minute from an important trip to Japan to attend the opening ceremony in Doha.
Russia isn’t in the competition and there is no indication that Putin is a particular fan of “the beautiful game.” So, given all the other imponderables — recession, COVID, winter weather, etc. — perhaps it doesn’t really deserve to be considered. But one wonders how much the Russian people, who, after all, hosted the last World Cup, are watching and wishing that their lives could be so “normal.” Now that would be a new way of looking at the world.
Simon Henderson is the Baker Fellow and director of the Bernstein Program on Gulf and Energy Policy at the Washington Institute for Near East Policy. Follow him on Twitter @shendersongulf.