How the EU tried to pull a Biden on OPEC

OPEC has a responsibility to maintain the stability of oil markets. That’s in indirect quote of an EU official by Reuters in a report detailing a meeting between EU representatives and OPEC. It is also the second most charmingly cute attempt at polite pressure I’ve seen in the past year.

The first, of course, was President Biden’s call on the oil cartel to boost production last summer. It was a polite call, one along the lines “Let’s help each other out here because we’re all in this together.” That call appealed to OPEC to help the global economy, not American drivers.

Later, the White House hardened its tone. By October, Biden was accusing OPEC of being responsible for high petrol prices in the United States because it was refusing to pump as much oil as the U.S. wanted it to. He even struck a pose that just a few months later the Saudi Crown Prince also struck, and the latter did it better.

"A lot of Middle Eastern folks want to talk to me," Biden said in October. "I'm not sure I'm going to talk to them. But the point is, it's about gas production."

Just for comparison’s sake, here’s the excerpt from the Atlantic interview with Mohammed bin Salman: “We asked whether Biden misunderstands something about him. “Simply, I do not care,” he replied. Alienating the Saudi monarchy, he suggested, would harm Biden’s position. “It’s up to him to think about the interests of America.” He gave a shrug. “Go for it.””

So, the U.S. tried coaxing OPEC into pumping more oil, it tried guilting it into doing so and it failed with both approaches. And now the EU is doing exactly the same thing and, apparently, hoping for a different outcome.

Here’s an excerpt from the Reuters report on the EU-OPEC meeting: “The European Union reiterated its call in the meeting for oil-producing countries to look at whether they can increase deliveries to help cool soaring oil prices, a European Commission official told Reuters. EU representatives also pointed out that OPEC has a responsibility to ensure balanced oil markets, the official said.”

Per a Bloomberg report, the official in question was EU Energy Commissioner Kadri Simson, who also told OPEC that it could “tap its existing spare output capacity to assist in the crisis.” Because OPEC would never have thought about this in a million years, of course.

For those who have chosen to live their lives without the presence of cats in them, the above action by the EU is the verbal equivalent of a cat tapping a playful human hand with a paw that only has a hint of claw in it and the promise of a lot more claw if the human hand doesn’t stop playing. The EU’s problem is that it has cheerfully declawed itself with its transition plans and it has zero influence over the OPEC members that matter: Saudi Arabia and the UAE.

No wonder, then, that the cartel’s secretary-general, Mohammed Barkindo, was perfectly explicit in his painting of the reality that OPEC will continue to support when it comes to the oil market balance.

"We could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions," Barkindo said in his speech to the EU, per a Reuters report.

"Considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude,” he added, perhaps to cushion the blow a bit with the “nearly” before the impossible.

Would anyone be willing to bet that the EU will try to increase the pressure? It doesn’t, after all, have a whole lot of other options, not really, not even with millions of barrels of U.S. oil. Imagine what will happen in Congress if U.S. producers who, according to the ruling party, are deliberately not doing enough to lower retail fuel prices, start boosting exports to Europe. We don’t have to imagine what will happen to those same retail fuel prices.

So, with the U.S. out as saviour for the European damsel in oil distress, OPEC is the only option. Can the Saudis and the Emiratis be pressured into boosting production? Hardly. The EU is a net exporter to Saudi Arabia. It exports a lot of things to the Kingdom, from commodities through chemicals to manufactured goods. Is it, however, an irreplaceable trade partner? Hardly. After all, the trade balance is only slightly in the EU’s favour and it is a major importer of Saudi commodities including, yes, petroleum.

One reason for OPEC to refuse to acquiesce to the EU’s request for more oil is that its strategic interests in OPEC+ are at odds with the interests of the EU. But there is something more pragmatic as well. Tapping spare production capacity must be motivated by anticipation of long-term demand growth. And the EU can hardly be considered a source of such demand.

The union plans to be consuming 30% less oil in 2030 than it was consuming in 2015, Reuters recalls in its report on the meeting with OPEC. This is the very opposite of motivational for large oil producers who have already been at the receiving end of enough pressure with regard to future oil demand precisely because of the EU’s lower consumption plans.

So far, it has been an almost literal repeat of the U.S. scenario: Act 1. Let’s go green; Act 2. Wait, we need energy now, not in 2050; Act 3. Maybe OPEC will help, that’s what they do; Act 4. OPEC is bad, we’ll force it to help; Act 5. Oh, crap, it won’t budge; Act 6. We’re on our own.

The EU is playing Act 3 right now, with the chances good that it will proceed to Act 4 soon enough. Act 5 and 6 will then only be a matter of time with one significant difference. The U.S., regardless of its anti-hydrocarbon federal policies, has the resources and the production to keep itself afloat. The EU has neither. The EU will remain dependent on outside suppliers for its energy for the foreseeable future thanks to its own stunningly shrewd and astute energy policies.

Photo credit: Ken Mull