Not For Love Of Russia - Saudi Arabia Needs Oil At Above $80/bl To Fund Its Own Budget

Rep. Ro Khanna and Sen. Chris Murphy each demonstrate how painfully stupid and ignorant democrat congress critters are on the topic of energy, energy markets, and foreign policy. With morons like this running their mouths in public, you don't even need self-interested enemies. 

Rule of Thumb for (short and medium term) demand/supply elascity of oil; 1:20 

A 1% change in supply results in a 20% change in price. 

$100 million oil demand is close enough to estimate the impact of both the OPEC supply cuts as well as maybe a 1 million (?) reduction in RF exports to NATOland.

3% reduction in supply equals….a whopping huge increase in price. 

(note long term oil price elasticity is close to 1:1, but long term is generally out 3 years )

thehill |  Congressional Democrats and the Biden administration took aim at the Organization of Petroleum Exporting Countries and its lead producer, Saudi Arabia, following the announcement that the OPEC+ bloc will cut oil production by 2 million barrels a day. 

The announcement comes months after President Biden visited Saudi Arabia to appeal to the kingdom’s leaders to increase production in hopes of reducing domestic gas prices and depriving Russia of energy revenues.

The cuts could mean an increase in gas prices ahead of election day and throw a lifeline to the Kremlin after weeks of gains by Ukrainian forces against the Russian invasion. 

“It’s clear that OPEC+ is aligning with Russia with today’s announcement,” White House press secretary Karine Jean-Pierre told reporters hours after the announcement.

Pierre was noncommittal on whether the announcement would affect broader Washington-Riyadh relations, saying, “I can speak to this decision: it’s a mistake.” 

Democrats in Congress were blunter, specifically questioning the purpose of overlooking Saudi Arabia’s human rights records and selling the nation weapons at no benefit to the U.S.  

“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,” Sen. Chris Murphy (D-Conn.), who sits on the Senate Foreign Relations Committee, tweeted Wednesday morning. 

Murphy further excoriated the decision in an interview with CNBC Wednesday from the Warsaw Security Forum in Poland, calling for a “full-scale re-evaluation” of the U.S.-Saudi alliance.  

“What’s the point of looking the other way as the Saudis chop up journalists [and] repress political speech inside Saudi Arabia if, when the chips are down, the Saudis essentially choose the Russians instead of the United States?” Murphy said, referencing the 2018 assassination of Washington Post columnist Jamal Khashoggi.

“We’ve been very clear with them; we need them right now … and it seems like either the Saudis aren’t willing to stand with us or have to be pushed very hard to stand with us,” Murphy said. 

The Connecticut senator struck a pessimistic note on Biden’s July visit, saying it “does not seem to have gotten us what we need,” also referencing the collapse of the truce in Yemen’s civil war. “I think you have to be very careful doing business with the Saudis these days.”