Officially, the reason OPEC members will not increase production is that they believe the oil and gas markets are still struggling with the fall of COVID-19. OPEC +, originally created to deal with a major global oil surplus in 2020, is now becoming a major geopolitical force. The power of the cartel has forced Western and Asian oil consumers to become more assertive in their demands on the group. In light of the ongoing Russian invasion of Ukraine and the growing threat of militarization of energy from Moscow, OPEC actions in the oil market are increasingly seen as policies. No matter how hard they try, Riyadh, Abu Dhabi and other OPEC members will fight to change the mindset of OECD countries on this front. OPEC’s recent decision to remove the International Energy Agency (IEA) oil market data and its reports from its official list will be seen by OECD countries as further evidence of its political trends. While OPEC formally rebukes all allegations of political interference in its decisions, OPEC’s strategies are clearly linked to the geopolitical views of its members. The growing gap between OPEC and the West is not based solely on oil and gas demand or differences of opinion on the global energy transition. The most fundamental gap stems from the lack of trust between Western powers and the Arab world. President Biden may enjoy overwhelming support in Europe over his stance on Putin’s invasion of Ukraine, but the same cannot be said of his relationship with the Arab world. OPEC’s strategy is currently being led by Riyadh and Abu Dhabi, both of which are struggling to engage in what they see as a return to Obama’s policies. The impact of the Arab Spring, the civil war in Syria and Libya, and the ouster of Egyptian President Hosni Mubarak are all fresh in the region’s memory. The fact that US President Biden has not yet met with the Saudi Crown Prince Mohammed bin Salman or has reservations about the successor to the throne, Mohammed bin Zayed, is not taken seriously. The current shift of alliances from the Arab world, including Egypt, Libya, and even Algeria, to the East, the establishment or improvement of strong relations with China and Russia, is a clear trend. If the West is serious about influencing OPEC production, it must first rebuild trust among its allies in the region. Perhaps the most important issue when it comes to this lack of trust between Western and Arab nations is the Iran nuclear deal. Against the will of the Arab states in the Gulf and North Africa, the Biden government and their European counterparts are continuing their efforts to reach a new Iranian JCPOA agreement. A possible JCPOA deal could potentially destabilize the oil and gas markets while angering key OPEC members and Israel. As the US and Europe persistently seek a new deal with Iran in the hope of securing additional oil supplies, they should be wary of the potential cost of such an agreement. While OPEC claims to be non-political, the West’s relationship with the Arab states will undoubtedly affect its ability to negotiate with the cartel. Efforts by Biden and other countries to exploit strategic oil reserves have proved ineffective in reducing the price of oil. Mutual trust based on mutual interest is the only solution here. While OPEC leaders may argue that their assessments are based on fundamental market elements, the reality is that the oil and gas markets are always political. Washington and Brussels must understand that a political solution is needed. As for the oil and gas markets, OPEC is holding all the paperwork right now and the West has to deal with that. By Cyril Widdershoven for Oilprice.com More top readings from Oilprice.com:
