Tag: energy commodities

Why we think we’re in a recession when the data says otherwise | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

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CNN Business
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It seems like you can’t go anywhere these days without colliding headfirst into another ominous prediction of imminent recession. CEOs, portfolio managers, politicians, news pundits, second cousins and even Cardi B are sounding the alarm: Hear ye! Hear ye! Economic downturn awaits all who dare enter 2023!

But those predictions contradict the slew of positive economic data we’ve seen: The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

The Federal Reserve’s regimen of painful interest rate hikes meant to tame persistent inflation could certainly cool the economy — as could events in Eastern Europe and China — but the economy has been able to successfully endure nearly a year of hikes and war in Ukraine with barely a dent.

It’s possible that recession chatter is just that. Chatter.

What’s happening: No one would ever accuse investors of shying away from their emotions: Passions run high on trading floors where feelings are often as valid as facts and fear and greed can sometimes run the show. Economists, on the other hand, are a data-dependent, stoic bunch. The US economy is not Wall Street, and market downturns are not recessions — but sometimes they get jumbled together in the public eye and their borders become hazy.

That appears to be the case: The Fed’s attempts to tamp down sky-high inflation are having an outsized impact on markets — the S&P 500 is down about 18% so far this year — but there has so far been little impact on the US economy as a whole.

This week, a number of top executives warned of an economic slowdown in 2023. CEOs from Goldman Sachs, JPMorgan, General Motors, Walmart, United and Union Pacific all said they were making plans for less-profitable times ahead. But hidden behind those “CEO PREDICTS RECESSION” headlines lies a lot of uncertainty.

Rising interest rates and geopolitical chaos are pointing towards storm clouds on the horizon, JPMorgan CEO Jamie Dimon told CNBC on Tuesday: “When you look out forward, those things may well derail the economy and cause this mild-to-hard recession that people are worried about.” When pressed to predict what was coming, he deflected. “It could be a hurricane. We simply don’t know,” he said. What was left unsaid was that sunny days are also a possibility.

Feedback loop: United Airlines CEO Scott Kirby also told CNBC on Tuesday that “we’re probably going to have a mild recession induced by the Fed.” He then went on to say that demand in his industry is higher than ever and United entered the fourth quarter with profit margins near all-time highs. He doesn’t see any indication of a slowdown on the horizon, either.

So why does he think a recession is coming? “If I didn’t watch CNBC in the morning, the word ‘recession’ wouldn’t be in my vocabulary,” he said. “You just can’t see it in our data.”

It’s almost as though Kirby predicted recession was imminent because other prominent voices predicted that recession was imminent. And it’s possible that we’re all stuck in a feedback loop that amplifies unjustified fear.

Prophecies are often self-fulfilling. If CEOs believe recession is coming, they preemptively batten down the hatches — and that means less spending and more layoffs, which in turn can trigger an economic downturn.

Goldman CEO David Solomon said Tuesday that the bank may soon terminate staff and exercise caution with its financial resources due to the mounting economic uncertainty. Morgan Stanley will reportedly slash its workforce by about 1,600 people, roughly 2% of the total.

The upside: Some parts of Wall Street seem to be avoiding the recession fervor. A recent study by Goldman Sachs found that smart money is betting on a soft landing. Money managers have been favoring industrial and commodity stocks that are sensitive to economic downturns. Stocks that act as a buffer during economic downturns like consumer staples and utilities have fallen out of favor at investment funds with assets totaling almost $5 trillion, Goldman strategists found.

“Current sector tilts are consistent with positioning for a soft landing,” they wrote.

Oil prices have tumbled to their lowest level since Christmas as worries about the health of the economy weigh on crude, overshadowing concerns about new restrictions imposed on Russian energy, reports my colleague Matt Egan.

Brent crude, the world benchmark, lost nearly 3% on Thursday to around $77.45 a barrel.

The oil selloff comes after the West hit Russia with new restrictions that, so far at least, do not appear to be derailing global energy markets.

The European Union on Monday imposed a ban on seaborne oil imports from Russia, while the West placed a $60 cap on Russian oil. Both moves are designed to hurt Russia’s ability to finance its war in Ukraine, without hurting consumers by causing Moscow to slash oil production.

“Russia oil is still on the market. As of now, it appears Russia is willing to play ball,” said Robert Yawger, vice president of oil futures at Mizuho Securities.

The tame reaction from energy markets is a welcome gift for Americans heading on long drives this holiday season, as prices at the gas pump are expected to continue their recent plunge.

US oil this week hit its lowest level since December 23, 2021, before recovering a little on Thursday to trade up 2% at $73.60 a barrel. That leaves oil down by 43% since briefly topping $130 a barrel in March amid fears about Russia’s invasion of Ukraine.

The national average price for regular gasoline dipped by three cents to $3.33 a gallon on Thursday, according to AAA. Gas prices have dropped 14 cents in the past week and 47 cents in a month. The national average is a cent lower than a year ago when they averaged $3.34 a gallon.

Britain is bracing for further disruption from strikes heading into the Christmas period, as ambulance drivers and nurses join rail operators and postal workers in the worst wave of walkouts the country has endured for at least a decade, reports my colleague Hanna Ziady.

More than 20,000 ambulance workers, including paramedics and call handlers, are expected to strike on December 21 in a dispute over pay, according to statements from labor unions GMB, Unison and Unite.

The strike will involve just under half of all ambulance drivers in England, Wales and Northern Ireland, although unions have said they will cover life-threatening emergencies during the walkouts. More than 10,000 ambulance workers represented by the GMB Union will strike again on December 28.

Strikes have swept the United Kingdom this year, as workers grapple with a cost-of-living crisis and stagnating wages. Consumer prices rose by 11.1% in the year to October, a 41-year high. Once inflation is taken into account, average wages fell by the biggest drop on record earlier this year, and were still declining in the June-September period.

According to The Times newspaper, one million UK workers are set to strike in December and January. Data from the Office for National Statistics shows Britain has already lost at least 741,000 days to strike action this year, putting it on track for its worst year of labor disputes in at least a decade.

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December 8, 2022
When China and Saudi Arabia meet, nothing matters more than oil | CNN Business

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Hong Kong
CNN Business
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Chinese President Xi Jinping is visiting Saudi Arabia this week for the first time in nearly seven years, during which he is expected to sign billions of dollars of deals with the world’s largest oil exporter and meet leaders from across the Middle East.

The visit is a sign that China and the Gulf region are deepening their economic relations at a time when US-Saudi ties have crumbled over OPEC’s decision to slash crude oil supply. As Xi wrote in an article published in Saudi media, the trip was intended to strengthen China’s relations with the Arab world.

China is Saudi Arabia’s biggest trading partner and a source of growing investment. It’s also the world’s biggest buyer of oil. Saudi Arabia is China’s largest trading partner in the Middle East and the top global supplier of crude oil.

“Energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team. “There is great recognition of the need to build a framework to ensure that this interdependence is accommodated politically, especially given the scope of energy transition in the West.”

Governments around the world have committed to drastically cutting carbon emissions over the coming decades. Countries such as Canada and Germany have doubled down on renewable energy investments to expedite their transition to net-zero economies.

The United States has significantly increased domestic oil and gas output since the 2000s, while accelerating its transition to clean energy.

The Russian invasion of Ukraine in February has triggered a global energy crisis that has left all countries racing to shore up supplies. And the West has further scrambled the oil markets by slapping an embargo and price cap on the world’s second biggest exporter of crude.

Energy security has also increasingly become a key priority for China, which is facing significant challenges of its own.

Last year, bilateral trade between Saudi Arabia and China hit $87.3 billion, up 30% from 2020, according to Chinese customs figures.

Much of the trade was focused on oil. China’s crude imports from Saudi Arabia stood at $43.9 billion in 2021, accounting for 77% of its total goods imports from the kingdom. That amount also makes up more than a quarter of Saudi Arabia’s total crude exports.

“Stability of energy supplies, in terms of both prices and quantities, is a key priority for Xi Jinping as the Chinese economy remains heavily reliant on oil and natural gas imports,” said Eswar Prasad, a professor of trade policy at Cornell University.

The world’s second largest economy is heavily reliant on foreign oil and gas. 72% of its oil consumption was imported last year, according to official figures. 44% of natural gas demand was also from overseas.

At the 20th Party Congress in October, Xi stressed that ensuring energy security was a key priority. The comments came after a spate of severe power shortages and soaring global energy prices following Russia’s invasion of Ukraine.

As the West shunned Russian crude in the months that followed the invasion, China took advantage of Moscow’s desperate search for new buyers. Between May and July, Russia was China’s No. 1 oil supplier, until Saudi Arabia regained the top spot in August.

“Diversity is a key ingredient for China’s long-term energy security because it cannot afford to put all of its eggs in one basket and turn itself into a captive of another power’s energy and geostrategic interests,” said Ahmed Aboudouh, a nonresident fellow with the Middle East Programs at the Atlantic Council, a research institute based in DC.

“Although Russia is a source of cheaper supply chains, nobody can guarantee, with utmost certainty, that the China and Russia relationship will continue to shore up 50 years from now,” Aboudouh said.

The Saudi Press Agency cited Saudi energy minister Prince Abdulaziz bin Salman as saying Wednesday that the kingdom would remain China’s “credible and reliable partner in this field.”

Saudi Arabia also has strong motivations to deepen energy ties with China, according to Gal Luft, co-director of the Institute for the Analysis of Global Security.

“The Saudis are concerned about losing market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” he said. “Their goal is to ensure China remains a loyal customer even when the competitors offer [a] cheaper product.”

Oil prices have fallen back to where they were before the Ukraine war on fears of a sharp global economic slowdown. The extent to which the Chinese economy can pick up pace next year will have a huge bearing on how bad that slump will be.

Beyond security of supply, Saudi Arabia could offer Beijing another prize with bigger geopolitical ramifications.

Riyadh has been in talks with Beijing to price some of its oil sales to China in the Chinese currency, the yuan, rather than the US dollar, according to a Wall Street Journal report. Such a deal could be a boost to Beijing’s ambitions to expand the Chinese currency’s global influence.

It would also hurt the long-standing agreement between Saudi Arabia and the United States that requires Saudi Arabia to sell its oil only for US dollars and to hold its reserves partly in US Treasuries, all in return for US security guarantees. The “petrodollar system” has helped preserve the dollar’s status as the top global reserve currency and payment medium for oil and other commodities.

Although Beijing and Riyadh never confirmed the reported talks, analysts said it was logical that the two sides would be exploring the possibility.

“In the near future, Saudi Arabia could sell some of its oil and receive revenues in Chinese yuan, which makes economic sense as China is the kingdom’s top trading partner,” said Naser Al Tamimi, senior associate research fellow at ISPI, an Italian think tank on international affairs.

Some believe it’s already happening, but that neither China nor the Saudis want to highlight it publicly.

“They know too well how sensitive this issue [is] for the United States,” said Luft. “Both parties are overexposed to the US currency and there is no reason for them to continue to conduct their bilateral trade in a third party’s currency, especially when this third party is no longer a friend of either.”

Xi’s visit could mark another step “in the erosion of the dollar’s status” as reserve currency, he added.

Nonetheless, there are limits to the growing ties between Riyadh and Beijing.

“The Biden administration’s approach to the Middle East has concerned the Saudis, and they see a growing relationship with China as a hedge against potential US abandonment and a tool for leverage in negotiations with the United States,” said Jon B. Alterman, director of the Middle East Program at the Center for Strategic and International Studies, a Washington DC-based think tank.

The Biden administration has reoriented its policy priorities with a focus on countering China. At the same time, it has indicated its intention to downsize its own presence in the Middle East, sparking worries among allies there that the United States may not be as committed to the region as it used to be.

“All that being said, Chinese-Saudi ties pale in both depth and complexity to Saudi-US ties,” Alterman said. “The Chinese remain a novelty to most Saudis, and they are additive. The United States is foundational to how Saudis see the world, and how they have seen it for 75 years.”

Despite the possibility of shifting to yuan transactions, it’s too early to say Saudi Arabia would ditch the dollar in pricing its oil sales, analysts said.

Eurasia Group’s Kamal believes it’s “highly unlikely” that Saudi Arabia would take such a step, unless there is an implosion on the US-Saudi relationship.

“In essence there could be discussion on pricing of barrels to China in yuan, but this would be limited in size and probably only correspond to bilateral trade volumes,” he said.

Prasad from Cornell University said countries like China, Russia, and Saudi Arabia are all eager to reduce their dependence on the dollar for oil contracts and other cross-border transactions.

“However, in the absence of serious alternatives and with few international investors willing to place their trust in these countries’ financial markets and their governments, the dollar’s dominant role in global finance is hardly under serious threat,” he said.

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December 7, 2022
US trade deficit edged up to $78.2 billion in October | CNN Business

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CNN Business
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The US trade gap edged only slightly higher in October than the month before, to $78.2 billion.

The latest reading was up just 5.4%, less than half the pace of increase from the revised September reading, when the trade deficit jumped by 12.7% to $74.1 billion.

A strong dollar and weaker global demand weighed on exports both months. A strong dollar makes US goods more expensive to foreign buyers and it also makes imports more affordable for US buyers. But economic slowdowns in overseas markets also hit US exports in the most recent readings.

The latest report shows exports fell 0.7% in October compared to the month before, and are down nearly 2% from the record exports set in August. Most of the drop was in the export of goods, rather than services, which fell 4.4% compared to August.

Oil prices have come down since earlier this year, according to data released in the report. The average price of crude oil imports in the month was $82.05 a barrel, down 5.7% from September, and down 21.7% from the peak in June.

But the United States now exports more petroleum products, by dollars, than it imports. So a lower price of crude no longer helps the trade deficit the way it might have done in the past, when crude and petroleum product imports vastly exceeded exports.

The deficit in the movement of goods between the United States and China narrowed significantly in the latest report, falling 22.6% to $28.9 billion from $37.3 billion, one factor in the smaller trade gap increase.

Although most of that narrowing was due to a 31.3% jump in the export of US goods to China, compared to September, a 9.5% decline in US imports of Chinese goods was also a factor in the smaller trade deficit between the two countries.

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December 6, 2022
China markets tank as protests erupt over Covid lockdowns | CNN Business

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CNN Business
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China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

Hong Kong’s Hang Seng

(HSI) Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

(HSI) China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

(N225) shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

“Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

“In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

“For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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November 27, 2022
Biden’s quiet campaign season brings him back to familiar territory in Pennsylvania | CNN Politics

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CNN
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When President Joe Biden visited Pennsylvania on Thursday, he touted infrastructure investments that helped rebuild a collapsed bridge and raised campaign cash away from cameras with the state’s Democratic Senate candidate.

Where he didn’t appear was a campaign rally stage.

Three weeks before November’s elections, Biden’s visit to Pittsburgh and Philadelphia neatly demonstrated a political strategy focused on promoting his agenda and talking with donors rather than headlining stump speeches alongside vulnerable Democrats.

He has been a frequent visitor to Pennsylvania, where Democratic Lt. Gov. John Fetterman holds a narrow lead in his race against Republican Dr. Mehmet Oz in the US Senate race. Trading his trademark sweatshirt and basketball shorts for a dark suit and tie, Fetterman greeted Biden at the airport alongside his wife.

“You’re gonna win!” Biden said as he shook the candidate’s hand.

Biden has visited the commonwealth nine times this year, including Thursday’s visit, and 18 times since he became president.

“I’m a proud Delawarean, but Pennsylvania’s my native state. It’s in my heart. I can’t tell you how much it means to me to be part of rebuilding this beautiful state,” Biden said. “My Grandfather Finnegan from Scranton would really be proud of me now.”

Still, despite the fondness, Biden’s visit was relatively low-key for a presidential stop weeks ahead of a critical midterm contest. He did not hold a rollicking campaign rally, opting for a smaller profile event with several dozen officials and workers from the bridge project.

Biden’s approach borne out of political reality: While many of Biden’s accomplishments have been well-received by voters – and, in some cases, embraced by Republicans who voted against them – Biden himself remains unpopular and some Democrats continue to keep their distance as the midterm contests grow near.

Departing the White House on Thursday, Biden bristled when asked why more Democrats weren’t joining him for political events.

“That’s not true,” Biden said. “There have been 15. Count, kid, count.”

Later, as he and Fetterman dropped by a Primanti Bros. sandwich shop near Pittsburgh, he told reporters he’d been requested to visit Nevada and Georgia, two states with tight Senate races.

“We’re trying to work it out now,” he said. “I don’t know where I’m going. I’ve got about 16, 18 requests around the country.”

Over the past weeks, Biden has worked to expand his list of achievements using executive power, including pardoning low-level marijuana offenders, canceling some student loan debt, reducing the cost of hearing aids and declaring a World War II training site a national monument.

This week alone, he promised to sign a bill enshrining abortion rights into law if Democrats gain seats, outlined billions of dollars to invest in domestic battery manufacturing and released another 15 million barrels of oil from the nation’s strategic reserves as he works to bring down gas prices.

Biden denied the oil announcement was politically motivated.

“I’ve been doing this for how long now? It’s not politically motivated at all,” he said. “It’s motivated to make sure that I continue to push on what I’ve been pushing on.”

Yet the timing of the release nonetheless came as Biden’s party looks with growing concern at the prospect of losing its congressional majorities next year, and the White House searches for steps to appeal to Americans.

In Pittsburgh, the President spoke at the Fern Hollow Bridge, a four-lane steel span that collapsed into a snowy ravine in January. Biden happened to be visiting the city that day to speak about infrastructure, and the presidential motorcade made a detour to view the damage.

“A complete catastrophe was avoided but it never should have come to this,” Biden said on Thursday. The President noted how quickly the bridge was bring rebuilt and said that while it wasn’t funded by his bipartisan infrastructure law, it was completely funded by the federal government.

Biden said that “God willing” the bridge will be completely open in December, telling the audience: “I’m coming back to walk over this sucker.”

Biden was joined by a slew of top Pennsylvania elected officials, most notably Fetterman, who is locked in one of the most closely watched midterm contests. Biden is also scheduled to join Fetterman later on Thursday for a fundraiser in Philadelphia.

While the bridge’s reconstruction wasn’t directly funded by the bipartisan infrastructure law, a White House official said funding from the law allowed Pennsylvania’s Transportation Department “to move funds quickly to support this project, without having to slow down or interfere with other projects in the pipeline.”

The rebuilding was funded through $25.3 million in federal funding appropriated to Pennsylvania in Fiscal Year 2021, the White House official said.

The law allocated $40 billion toward bridge projects over five years. Since last October, repairs or replacements have begun on more than 2,400 bridges through funding from the infrastructure law, according to the White House.

That measure has emerged as a central talking point for Biden during this year’s midterms. Candidates who might think twice about holding a political rally with Biden have seemed eager to appear alongside him at official events heralding improvements on rail lines, airport terminals or bridges. The President has hammered Republicans who voted against the bill but have nonetheless taken credit for projects made possible by the $1.2 trillion law.

In planning Biden’s recent travel, including political events and official White House duties, his advisers have taken into account the sensitive political reality that some Democratic candidates in tough races would prefer he not visit their district or state in the final stretch to the midterms.

But one Democratic official familiar with the White House’s thinking said an important overarching dynamic is that even the candidates who would rather not appear alongside Biden are still eager to run on his legislative accomplishments, describing it as a “halfsies” situation.

“There are some campaigns that don’t want him to physically campaign in his state,” the official said. “But – people are running on his agenda.”

Given the string of legislative victories that Biden’s party scored in the first half of the Biden administration – including the bipartisan infrastructure bill – even the events that are technically billed official White House business are effectively no different from political events these days, that official noted.

“Every event is political now,” they said.

Biden remains eager to visit key battlegrounds, according to his aides. Earlier this year, he voiced some frustration that more Democrats weren’t lining up to use him on the campaign trail.

Now, Biden has settled into a midterm push that has him traveling mostly to states he won in 2020 while avoiding certain marquee races where his presence could be a drag on Democratic candidates.

Other Democrats appear more welcome. Former President Barack Obama will hold campaign rallies for Democrats in Atlanta, Detroit and Milwaukee in the days before the elections. Sen. Bernie Sanders, the independent Vermont democratic socialist, will visit battleground states on a tour targeted to younger voters.

The White House is working closely with the Senate and House campaign committees and will send the President where he could be helpful, aides said, and will avoid traveling to areas where nationalizing the race would be seen as a detriment to candidates.

The logistics of presidential travel also complicate some travel, aides said, because campaigns must help foot the expensive costs of Air Force One.

Still, at similar stages in their terms, Obama and former President Donald Trump were engaging in more traditional campaign-style events for candidates ahead of midterm elections, despite questions about dragging down candidates.

Both saw their party lose unified control of Congress in their first midterm elections, a historical precedent Biden hopes to break – even as he avoids big political events.

The White House has defended Biden’s travel plans, insisting he is traveling “nonstop” and intends to visit states “where he is needed” in the run-up to the vote.

Still, in the weeks ahead of the midterms, Biden continues to spend most weekends at his homes in Delaware, including last weekend in Wilmington and this weekend in Rehoboth Beach.

On Friday, he’ll stop at Delaware State University to tout his efforts at student debt forgiveness, before heading to his beach house. This week, the debt relief program Biden announced earlier this year went online, with millions applying to have some or all of their loans forgiven.

In one of his previous trips to campaign in Pennsylvania, on Labor Day, Biden appeared before a small crowd with Fetterman at a union picnic in Pittsburgh. When the two men emerged from the union hall together, Fetterman raised his arms and pumped his fists.

But when Fetterman spoke ahead of Biden, he used the opportunity to lambast his Republican opponent for owning multiple homes – without mentioning the President at all.

During a 15-minute private meeting beforehand, Fetterman pushed Biden to begin the process of rescheduling marijuana, one of his top issues.

A few weeks later, the White House said Biden would issue pardons for federal simple marijuana possession offenses and task members of his administration to “expeditiously” review how marijuana is scheduled under federal law, the first step toward potentially easing a federal classification that currently places marijuana in the same category as heroin and LSD.

Biden himself has only mentioned the decision in passing. But Fetterman hailed the move and was quick to cite his conversation with Biden after the White House made the announcement.

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October 20, 2022
Saudis aren’t weaponizing oil like Americans claim, top official says | CNN Business

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CNN
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Saudi Minister of State for Foreign Affairs Adel al-Jubeir said his country partnered with Russia to slash oil production in order to stabilize markets and denied that there were political motives behind the decision, which has enraged US leaders and sparked calls to rethink ties with Riyadh.

“We’re trying to make sure we don’t have erratic swings in prices,” al-Jubeir, one of Saudi Arabia’s top diplomats, told CNN’s Becky Anderson on Wednesday. “Our track record has been clear – we have always worked assiduously to maintain stability in the oil markets.”

Last week, OPEC+, the oil cartel led by Saudi Arabia and Russia, agreed to slash production by 2 million barrels per day, twice as much as analysts had predicted, in the biggest cut since the Covid-19 pandemic.

The move came despite an intense pressure campaign from the United States, which had warned Arab allies that such a move would increase prices and help Russian President Vladimir Putin continue to fund his war in Ukraine. Experts also fear that continued high oil prices could make it more difficult for the US to tamp down inflation, which has already skyrocketed this year.

Al-Jubeir, who is also the country’s climate minister, denied that there were any political motives to the decision and said the production cut was made to avoid major swings in the price of oil, which can affect consumers worldwide, and pointed to the fact that the price of oil has gone down since the reduction was announced last week.

“Saudi Arabia is not siding with Russia,” he told CNN. “Saudi Arabia is taking the side of trying to ensure the stability of the oil markets.”

“Saudi Arabia does not politicize oil. We don’t see oil as a weapon. We see oil as our commodity. Our objective is to bring stability to the oil market,” al-Jubeir said.

US President Joe Biden told CNN on Tuesday that Washington must now “rethink” its relationship with Riyadh following the cut. The decision was a particular affront for Biden because of his efforts over the summer to repair ties with Saudi Arabia, despite the kingdom’s woeful human rights record and the role of Saudi Crown Prince Mohammed bin Salman in the murder of dissident journalist Jamal Khashoggi. Bin Salman denied involvement in the murder, which captured international headlines in part due to the lurid details of the killing.

“I am in the process, when the House and Senate gets back, they’re going to have to – there’s going to be some consequences for what they’ve done with Russia,” Biden said.

Watch the full exclusive interview with President Joe Biden

On Wednesday, US national security adviser Jake Sullivan said Biden would examine all aspects of US ties with Saudi Arabia, including arms sales, as administration officials begin quiet discussions with members of Congress and congressional aides about how the US could impose consequences on the kingdom following the oil output cut.

“There is a range of interests and values that are implicated in our relationship with that country,” Sullivan told reporters. “The President will examine all of that. But one question he’s going to ask is: Is the nature of the relationship serving the interest and values of the United States and what changes would make it better serve the interests and values?”

Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud said in an interview with Saudi TV earlier Wednesday that OPEC+ needed to be proactive as central banks in the West moved to tackle inflation with higher interest rates, a move that could raise prospects of a global recession, which could in turn reduce demand for oil and drive its price down. Cutting production would ensure a smaller supply of oil, keeping its price higher. While that would protect the Saudi economy by ensuring it receives a steady flow of income from oil sales, it would force consumers across the world to pay more for energy and gas, further fueling inflation.

Saudi officials have insisted that the production cut is being done to protect the country’s economic interests. Because of its heavy dependence on oil revenues, the Saudi economy has a history of falling victim to boom and bust cycles in the oil market, where high prices bring in a flow of cash followed by downturns.

In the United States, however, the cut could have massive political ramifications ahead of next month’s midterm elections. After reaching highs over the summer, gas prices in the United States had been steadily decreasing, providing Biden and his top aides a potent talking point in the lead-up to the elections.

But a combination of factors, including rising demand and maintenance at some US refineries, has caused prices to begin ticking back up. The OPEC+ decision is likely to aggravate those factors.

The decision set off bipartisan fury in Washington when it was first announced last week. Saudi Arabia is now being accused of filling the Kremlin’s coffers with oil revenues just days after President Putin’s regime began carrying out large-scale missile attacks on civilian targets across Ukraine

“What Saudi Arabia did to help Putin continue to wage his despicable, vicious war against Ukraine will long be remembered by Americans,” tweeted Senate Majority Leader Chuck Schumer, a Democrat, on Friday.

Democratic Sen. Richard Blumenthal of Connecticut on Wednesday called for immediate action on his bill that would stop US arm sales to Saudi Arabia.

“The Saudis actions aid and abet a murderous and brutal criminal invasion by Russia,” Blumenthal said.

When asked about growing calls in Washington to limit ties with Saudi Arabia, al-Jubeir said he hoped that such talk was motivated by domestic politics ahead of the midterms.

Al-Jubeir said the relationship between the US and Saudi Arabia remains “robust.”

“The Kingdom of Saudi Arabia and the US have had a very strong relationship for eight decades … and we look forward to this relationship continuing for the next eight decades,” he added.

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October 12, 2022
Biden has a big oil problem. Here’s what you need to know about the recent OPEC+ decision. | CNN Politics

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A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

Washington
CNN
—

With just weeks to go until the November midterms, four letters are haunting President Joe Biden and the Democrats: OPEC.

Last week, the Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Saudi Arabia and Russia, said that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The group announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

The Biden administration criticized the decision in a statement, calling it “shortsighted” and saying that it’s harmful to some countries already struggling with elevated energy prices the most.

The production cuts will start in November. OPEC+, which combines OPEC countries and allies such as Russia, will meet again in December.

For one perspective on the OPEC+ decision and to better understand how it affects everyone, we turned to Hossein Askari, who teaches international business at The George Washington University.

Our conversation, conducted over the phone and lightly edited for flow and brevity, is below.

WHAT MATTERS: Can you walk us through this recent OPEC decision? What’s happening exactly?

ASKARI: So when the war in Ukraine started, sorry to tell your audience, but the United States was not very well prepared in what it was going to do. It sanctioned Russia for this and for that. And so the price of oil started going up. And at the same time, the United States actually put sanctions on Russian oil, not on gas, on oil. And so there was less Russian oil in the Western markets.

Russia actually started selling its oil more and more to China and to India and cutting its prices to those countries. So they would buy Russian oil, but there was a shortage of oil.

Another reason why the shortage had developed was America basically sanctions like a mad cowboy, if I may say that. It has sanctioned Venezuela for many years.

But Saudi Arabia, with the new effective ruler who’s known as MBS, he has cozied up to Putin. And so when President Biden went and saw him a few months back and kind of asked him to increase oil production – I’m sorry to say this, I have to throw in this bit of politics – I think America really shamed itself by doing that.

Of course, MBS did not respond positively. But now he, in fact, has gone over the top. He has agreed within OPEC – and of course he’s the main spokesman in OPEC with Russia – that they will cut back.

WHAT MATTERS: What does the OPEC decision mean for the average American?

ASKARI: From where we are now, crude oil prices by the end of the year, my guess, maximum, they’ll go up by $5 a barrel. Now, a lot of people think they’re gonna go up more than that. I don’t believe that, because I think the world economy is going to grow less and I think that we are going to see some Venezuelan oil come on the market, and I think we may see some deals made so some more Iranian oil may come on the market.

For gasoline, I think Americans can see maybe prices going up from where they are today, if nothing else happens, by about another 30 to 50 cents a gallon.

However, there is also another problem for Americans that is home heating oil, and that can also go up. So for the average American, they’re going to pay, no matter what, something more per gallon of gasoline at the pump. And I think there’s going to be more of an impact, actually, on the fuel oil that they heat their houses with. So it’s gonna put on the squeeze on the average American. There’s no two ways about it.

WHAT MATTERS: What should the US do now?

ASKARI: I think the United States should be much, much tougher with Saudi Arabia because we have bent over backward to accommodate them in every way. And we have looked the other way with what they’ve done. And now it’s the time to be tough. They’ve been tough with us. I think the President of the United States should be tough with Saudi Arabia.

WHAT MATTERS: What else can the US do in terms of helping with oil prices in the immediate term?

ASKARI: I think undoubtedly this administration has very bad rapport with US oil companies and energy companies. I think that there should be more behind-the scenes cooperation with the oil companies and the administration because you really need them now to cooperate.

I know a lot of people don’t believe in fracking, but maybe it’s time to do some more fracking. Maybe it’s time to increase output. They can increase output elsewhere too. I think that would be extremely, extremely helpful.

And I think the US oil companies – and I’m not a backer of oil companies, please don’t misunderstand – but I think they feel that the administration basically just wants to drive them out business.

WHAT MATTERS: Anything else you’d like to add?

ASKARI: Some people think that OPEC decisions are purely economic. Some people think purely political. It has always been both, especially for Saudi Arabia.

It is really Saudi Arabia and the United Arab Emirates driving OPEC’s decision. I think Americans should understand it’s not the other members, it’s not Nigeria or Iran. I feel Americans should understand who are our friends and who are not our friends.

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October 10, 2022
White House left looking for answers after OPEC+ announces oil production cuts | CNN Politics

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CNN
—

The OPEC+ decision to dramatically cut its oil output targets has left the White House grappling with a complex – and potentially damaging – mix of geopolitical and domestic challenges with few easy answers.

President Joe Biden now faces the reality that an already complex and tenuous bilateral relationship with Saudi Arabia has deeply fractured, the Western effort to isolate and shrink Russia’s war effort has taken a direct hit and the US economy and political picture have both grown more fragile.

“Disappointment. We’re looking at what alternatives we may have” to bring down oil prices, Biden told reporters when asked his reaction to the OPEC+ news.

“There’s a lot of alternatives. We haven’t made up our mind yet,” he added.

Biden’s advisers are now re-doubling efforts to find policy and diplomatic options to address the unwelcome surprise.

“We’re going to work to identify the tools that we have to ensure that organizations like OPEC that assign quotas to their members of how much to produce are not – have a muted and less of an impact on American consumers, and quite frankly, on the global economy,” Amos Hochstein, Biden’s top energy envoy, told Bianna Golodryga on CNN’s “New Day” Thursday.

The full scale of the fallout from Saudi Arabia-led oil cartel’s decision may not be apparent for months or longer, officials say. But they are also keenly aware just how many acutely important elements of the administration’s foreign and domestic agenda the production cut spills directly into.

Biden administration officials acknowledge they’re in a very difficult position over their relationship with Saudi Arabia.

Secretary of State Antony Blinken called OPEC’s move to cut oil production both “shortsighted and disappointing,” and said the administration is reviewing a “number of response options” when it comes to US-Saudi relations.

“We will not do anything that would infringe on our interests, that’s first and foremost, what will guide us,” Blinken said during a news conference in Peru on Thursday. “We will keep all of those interests in mind and consult closely with all of the relevant stakeholders as we decide on any steps going forward.”

There is clearly a tacit effort underway to evaluate ways to respond to the OPEC+ decision to cut back oil production by 2 million barrels per day. But as has been laid bare repeatedly over the course of Biden’s time in office, the power dynamics between the US and the Kingdom of Saudi Arabia are simply in a different place now than at any earlier point due to the economic and energy pressures tied to Russia’s invasion.

Crown Prince Mohammed bin Salman has made abundantly clear he feels no need to be the junior actor, and his overt and explicit moves toward China and Russia have ensured there is no subtlety in his approach.

On a purely oil market basis, the Saudis prize stability over anything else – stability the OPEC+ configuration has provided after damaging price wars and the volatility of the pandemic. Moscow, of course, is the key player in that configuration and it’s notable that beneath the output cut, an extension of the OPEC+ arrangement was also approved on Wednesday.

Still, while administration officials always viewed Biden’s trip to Jeddah – which resulted in the diplomatic fist bump seen around the world – as a critical regional security move, the cartel’s willingness to move in ways so obviously detrimental to US interests has reverberated across the administration. Biden again defended the trip Thursday, saying, “The trip was not essentially for oil. The trip was about the Middle East and about Israel and rationalization of positions.”

“It’s not always about us, we get it,” one US official said. “But they’re just as aware of the perceptions and implications of this move as we are.”

The most obvious lever for the US to pull is security related – it’s far and away the biggest leverage point. But the ramifications of any moves on that front are much broader than the bilateral relationship, officials note, and would directly undercut more than a year of intensive work to establish a coherent regional security posture.

White House press secretary Karine Jean-Pierre’s statement on Wednesday that it “is clear OPEC+ is aligning with Russia” and its war effort was as intentional as it was blunt. Hochstein, in his CNN interview, reiterated that the OPEC+ decision was a “huge mistake” and “the wrong thing to do” amid Russia’s ongoing war in Ukraine and high energy prices, saying that Russia and Saudi Arabia are “working together.”

US officials had previously been cautious about directly criticizing the obvious dance Saudi Arabia and others in the region have conducted with Moscow. That posture is gone.

Biden administration officials, according to people with knowledge, made very clear to the Saudis in the days leading up the move that US rhetoric would change dramatically and they would open the door to new options to respond to a major cut. The specifics of those options were left somewhat ambiguous intentionally. But the warning was there.

One notable line in the White House statement issued Wednesday by National Economic Council Director Brian Deese and national security adviser Jake Sullivan statement was the idea of working with Congress on legislation related to OPEC.

It’s a reference to a bill that would remove sovereign immunity from antitrust suits, opening the door for the US to sue cartel members. The White House has been cool to the idea due to the very real concern it would launch a price war with the market’s biggest players that would only serve to hurt US consumers. But just cracking the door open to looking at it is notable – and underscores the scale of the anger inside the West Wing.

The legislative reference underscores a key piece how the response will play out in the weeks ahead – the White House has made its statement, which – in a world of cautious diplo-speak – was sharply critical. Now officials have said they are perfectly comfortable letting congressional Democrats rail on the Saudis on their behalf, something they expect to only escalate in the days ahead given the convergence of geopolitical and domestic political factors.

The blistering response from Capitol Hill has the potential to create some the kind of pressure that could create space to pursue actions the administration has been wary of pursuing up to this point.

Connecticut Democratic Sen. Chris Murphy, for instance, tweeted, “I thought the whole point of selling arms to the Gulf States despite their human rights abuses, nonsensical Yemen War, working against US interests in Libya, Sudan, etc, was that when an international crisis came, the Gulf could choose America over Russia/China.”

The biggest focus for the White House now on oil is on the domestic front. Biden’s top energy and economic advisers met privately with oil executives last week and discussions between officials and industry players have continued this week. Another meeting is likely soon as they continue to search for options to boost US production.

While several options have been floated – including some that infuriate the industry, like potential curbs on exports – it remains unclear whether the White House is ready to move forward on any of them.

A question being weighed now is if OPEC+’s decision changes that dynamic at all in a relationship between the White House and industry that has ping-ponged between clear animosity to cooler heads prevailing and back toward palpable tension over the course of the last several months.

The White House rhetorical reversal hinting at the potential for new Strategic Petroleum Reserve releases, a complete 180-degree turn in less than 24 hours, was notable even if it didn’t signal anything concrete.

What it did signal, however, was a clear message to markets that the option was, in fact, on the table.

Blinken on Thursday once again highlighted what the administration has done to boost oil production in the US.

“We’ve taken a number of steps over the last months to try and ensure that that’s the case, including releasing oil from the Strategic Petroleum Reserve, increasing significantly our production. Oil production is up in the United States by about 500,000 barrels a day,” he said.

Blinken also added that the administration is “looking at other steps that we can take to ensure that there is adequate supply to meet to meet global demand.”

The final release of 10 million from Biden’s announced 180 million barrel release over six months is still scheduled for November, even though the actual total barrels released will fall under the full amount Biden initially targeted. Cracking the door open on additional releases was an effort to signal there is a view inside the White House that there are still metaphorical bullets in the chamber if they need them.

One key point to remember amid the hand-wringing: Predictions of specific price increases at the pump are a fool’s errand.

“I believe it will have less of an impact in the United States and far more of an impact on lower-income countries around the world,” Hochstein said.

The market has been pricing in the output cut for several days. A key element of the output cut is that nearly all OPEC+ members have been missing their production targets for months. So “2 million barrels per day” is actually far less than that from a production basis.

In other words, there are a myriad of factors that drive retail prices – such as in California, where soaring gas prices over the last two weeks were in large part due to a mess of refinery issues – and no single answer to the range of new complications White House officials are now facing.

Biden’s message, behind his disappointment with the production cut, was clear cut, according to Hochstein.

“The President is still instructing us to work, to do whatever we can,” he said.

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October 6, 2022
White House says Biden’s Saudi trip wasn’t a waste as he lambastes OPEC+’s ‘shortsighted’ decision to cut oil output | CNN Politics

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CNN
—

President Joe Biden is “disappointed” the Saudi-led OPEC+ oil cartel agreed to cut output by 2 million barrels per day, the White House said Wednesday, as the threat of rising gas prices looms weeks ahead of critical midterm elections.

The decision by the grouping of major oil producers rebuffed heavy lobbying from US administration officials and prompted Biden to say he was concerned about the move. It reversed a small increase in output OPEC+ announced shortly after Biden visited Saudi Arabia for a conference in July.

Still, the White House insisted that visit was not a “waste of time,” even as it sharply criticized the decision to cut production.

“The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” said two of Biden’s top aides, national security adviser Jake Sullivan and National Economic Council Director Brian Deese, in a statement.

“At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” the two advisers wrote.

The administration will “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the statement read, without specifying which actions are under consideration dampen the oil cartel’s sway.

Slashing oil production just ahead of November’s midterm elections poses a potential political problem for the President, who has touted this summer’s decreasing gas prices as he works to promote his agenda. The average gas price has been rising nationally again in recent days, according to AAA.

Earlier this year, Biden announced a major release of barrels from the Strategic Petroleum Reserve in an effort to alleviate pump prices. On Tuesday, the White House said it was not considering additional releases beyond the 180 million previously announced.

But after OPEC+ announced its decision on Wednesday, the White House said Biden would “continue to direct SPR releases as necessary,” apparently cracking open the door again to potential releases.

Departing the White House on Wednesday, Biden said he was concerned about the possibility of a significant cut to production.

“I need to see what the detail is. I am concerned, it is unnecessary,” he said in response to a question about the OPEC+ decision as he departed the White House for Florida, where he was set to tour storm damage.

The international cartel of oil producers held a critical meeting Wednesday, where energy ministers decided to slash production by 2 million barrels per day, the biggest cut since the start of the pandemic.

For the past several days, Biden’s senior-most energy, economic and foreign policy officials had been lobbying their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia and the United Arab Emirates to vote against cutting oil production.

When he visited Saudi Arabia in July, Biden sought to make clear it wasn’t solely to ask the oil-rich kingdom to increase its oil output. After decrying the regime’s human rights record as a candidate, Biden fist-bumped the powerful Crown Prince Mohammed bin Salman, who US intelligence has said masterminded the murder of Saudi journalist and US resident Jamal Khashoggi.

Speaking on Fox News shortly after the decision was announced, National Security Council communications coordinator John Kirby said the oil cartel was “adjusting back their numbers down a little bit” after making a small increase after Biden’s visit.

“OPEC+ has been saying and telling the word they’re actually producing 3.5 million more barrels than they actually are. So in some ways this announced decrease really gets them back into more align with actual production,” Kirby said, noting there hadn’t yet been dramatic shifts in the price of oil.

“We have to see how it plays out over the long term,” he said.

Kirby said Biden’s visit to Jeddah, Saudi Arabia, for a regional conference “was not about oil.”

“It was about larger national strategic and national interest goals throughout the region to try to foster more integrated cooperative region,” he said.

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October 5, 2022
OPEC announces the biggest cut to oil production since the start of the pandemic | CNN Business

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London
CNN Business
—

OPEC+ said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.

The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut following its first meeting in person since March 2020. The reduction is equivalent to about 2% of global oil demand.

The price of Brent crude oil rose 1.5% to more than $93 a barrel on the news, adding to gains this week ahead of the gathering of oil ministers. US oil was up 1.7% at $88.

The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “shortsighted” and saying that it will hurt low and middle-income countries already struggling with elevated energy prices the most.

The production cuts will start in November, and the Organization of Petroleum Exporting Countries (OPEC) and its allies will meet again in December.

In a statement, the group said the decision to cut production was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

Global oil prices, which soared in the first half of the year, have since dropped sharply on fears that a global recession will depress demand. Brent crude is down 20% since the end of June. The global benchmark hit a peak of $139 a barrel in March after Russia’s invasion of Ukraine.

OPEC and its allies, which control more than 40% of global oil production, are hoping to preempt a drop in demand for their barrels from a sharp economic slowdown in China, the United States and Europe.

Western sanctions on Russian oil are also muddying the waters. Russia’s production has held up better than predicted, with supply being diverted to China and India. But the United States and Europe are now working on ways to implement a G7 agreement to cap the price of Russian crude exports to third countries.

The oil cartel came under intense pressure from the White House ahead of its meeting in Vienna as President Biden tried to secure lower energy prices for US consumers. Senior Biden administration officials were lobbying their counterparts in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) to vote against cutting oil production, according to officials.

The prospect of a production cut was framed as a “total disaster” in draft talking points circulated by the White House to the Treasury Department on Monday, which CNN obtained. “It’s important everyone is aware of just how high the stakes are,” one US official said.

With just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid.

Rising oil prices could mean inflation remains higher for longer, and add to pressure on the Federal Reserve to hike interest rates even more aggressively.

But the impact of Wednesday’s cut, while a bullish signal for oil prices, may be limited as many smaller OPEC producers were struggling to meet previous production targets.

“An announced cut of any volume is unlikely to be fully implemented by all countries, as the group already lags 3 million barrels per day behind its stated production ceiling,” Rystad Energy analyst Jorge Leon said in a note.

Rystad Energy estimates that the global oil market will be oversupplied between now and the end of the year, dampening the effect of production cuts on prices.

— Alex Marquardt, Natasha Bertrand, Phil Mattingly, Mark Thompson and Betsy Klein contributed to this report.

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October 5, 2022
White House launches last ditch effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’ | CNN Politics

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Washington
CNN
—

The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.

The push comes ahead of Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that is widely expected to announce a significant cut to output in an effort to raise oil prices. That in turn would cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.

For the past several days, President Joe Biden’s senior-most energy, economic and foreign policy officials have been enlisted to lobby their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the UAE to vote against cutting oil production.

Members of the Saudi-led oil cartel and its allies including Russia, known as OPEC+, are expected to announce production cuts potentially up to more than one million barrels per day. That would be the largest cut since the beginning of the pandemic and could lead to a dramatic spike in oil prices.

Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”

“It’s important everyone is aware of just how high the stakes are,” said a US official of what was framed as a broad administration effort that is expected to continue in the lead up to the Wednesday OPEC+ meeting.

The White House is “having a spasm and panicking,” another US official said, describing this latest administration effort as “taking the gloves off.” According to a White House official, the talking points were being drafted and exchanged by staffers and not approved by White House leadership or used with foreign partners.

In a statement to CNN, National Security Council spokesperson Adrienne Watson said, “We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that.”

For Biden, a dramatic cut in oil production could not come at a worse time. The administration has for months engaged in an intensive domestic and foreign policy effort to mitigate soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to pay off, with US gasoline prices falling for almost 100 days in a row.

But with just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid. As US officials have moved to gauge potential domestic options to head off gradual increases over the last several weeks, the news of major OPEC+ action presents a particularly acute challenge.

Watson, the NSC spokesperson declined to comment on the midterms, saying instead, “Thanks to the President’s efforts, energy prices have declined sharply from their highs and American consumers are paying far less at the pump.”

Amos Hochstein, Biden’s top energy envoy, has played a leading role in the lobbying effort, which has been far more extensive than previously reported amid extreme concern in the White House over the potential cut. Hochstein, along with top national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues as a follow up to Biden’s high-profile visit to Saudi Arabia in July.

Officials across the administration’s economic and foreign policy teams have also been involved with reaching out to OPEC governments as part of the latest effort to stave off a production cut.

The White House has asked Treasury Secretary Janet Yellen to make the case personally to some Gulf state finance ministers, including from Kuwait and the UAE, and try to convince them that a production cut would be extremely damaging to the global economy. The US has argued that in the long-run a cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would be designed to accomplish. Their logic is that “cutting right now would increase risks of inflation,” lead to higher interest rates and ultimately a greater risk of recession.

“There is great political risk to your reputation and relations with the United States and the west if you move forward,” the White House draft talking points suggested Yellen communicate to her foreign counterparts.

A senior US official acknowledged that the administration has been lobbying the Saudi-led coalition for weeks to try to convince them not to cut oil production.

It comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman on a trip that was driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to increase oil production which would help bring down the then-skyrocketing gas prices.

When OPEC+ agreed a few weeks later to a modest 100,000 barrel increase in production, critics argued Biden had gotten little out of the trip.

The trip was billed as a meeting with regional leaders about issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for rehabbing the image of the crown prince who had been directly blamed by Biden for orchestrating the killing of Washington Post columnist Jamal Khashoggi.

In the months leading up to the meeting, Biden’s top aides for the Middle East and energy, McGurk and Hochstein, shuttled between Washington and Saudi Arabia planning and coordinating the visit.

One diplomatic official in the region described the US campaign to block production cuts as less of a hard sell, and more of an effort to underscore a critical international moment given the economic fragility and ongoing war in Ukraine. Though another source familiar with the discussions told CNN it was described by a diplomat from one of the countries approached as “desperate.”

A source familiar with the outreach says a call was planned with the UAE but the effort was rebuffed by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Neither did Saudi Arabia’s. The UAE embassy declined to comment.

Publicly, the White House has cautiously avoided weighing in on the possibility of a dramatic oil production cut.

“We are not members of OPEC+, and so I don’t want to get ahead of what could potentially come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters Monday. The US focus, Jean-Pierre said, remains “taking every step to ensure markets are sufficiently supplied to meet demand for a growing global economy.”

OPEC+ members are weighing a more dramatic cut due to what has been a precipitous decline in prices, which have dropped sharply to below $90 per barrel in recent months.

Hanging over Wednesday’s OPEC+ meeting in Vienna will also be the looming oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not only Russia, have expressed unhappiness with the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.

Included in the White House talking points to Treasury was a US proposal that if OPEC+ decides against a cut this week the US will announce a buyback of up to 200 million barrels to refill its Strategic Petroleum Reserve (SPR), an emergency stockpile of petroleum that the US has been tapping into this year to help lower oil prices.

The administration has made it clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC’s oil to replenish the SPR. The idea has been to convey to OPEC+ that the US “won’t leave them hanging dry” if they invest money in production, the official said, and therefore, that prices won’t collapse if global demand decreases.

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October 4, 2022