Will the diplomatic talents of Joe Biden, who visited Saudi Arabia on Friday, permanently bend the oil price curve? Guest of Good Morning Business this Friday, Philippe Chalmin, professor of economics at Paris Dauphine University and founder of the CyclOpe circle commented on the expected effects of the visit of the US head of state to Saudi Arabia on the price of black gold. And if the visit is important, the economist does not see it as an immediate turning point in the price of a barrel.
After the highs registered at the end of February with the start of the war in Ukraine, the price of a barrel has already begun to fall, a fall that has become even more pronounced, particularly under the effect of the recession.
This week’s move below 100 dollars is explained by market expectations of a global economic slowdown, with the music of the recession playing, and a slight drop in demand. Although it is far from peaks above 140 dollars a barrel, the price of oil remains high despite everything. And with Russian oil disappearing from the market for Westerners, eyes are turning to producing countries that could increase production.
An increase in production?
However, with the end of the gradual release of quotas decided last year, OPEC+ countries will normally have to increase by 650,000 barrels per day in July and August. Which should, on paper, have a downward effect on prices.
Finally, the countries that have the capacity to increase their production are not so numerous. These are Saudi Arabia and the United Arab Emirates. “I don’t see the Saudis doing enough,” the CyclOpe president said.
A limited impact on the price of fuel in the United States
In addition, an increase in production in Saudi Arabia would have a limited impact on the price of fuel in the United States. The rise in the gallon is explained in part by the refining problem in this territory. The country, whose capacities have decreased, is facing very strong tensions in its refineries, at the time of the “driving season”, these summer months in which Americans travel many kilometers in cars.
So even if Joe Biden were to win back a deal from Mohammad Bin Salman to increase production, he still wouldn’t allow a drop in the price of gasoline at the pump for Americans. However, this is perhaps the main political objective pointed out by the US head of state, a few months before the mid-term elections.
Source: BFM TV
