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Saudi Arabia’s Crown Prince Mohammed bin Salman and US President Joe Biden during a summit in Jeddah.

Balkis Press/ABACA via Reuters Connect

Laws, votes & guns: America’s options to respond to Saudi oil cuts

Following the largest cut in oil production — 2 million barrels per day — since the beginning of the pandemic by the Saudi-led OPEC+ oil cartel (which includes Russia), the Biden administration finds itself on a war footing about how to deal with Riyadh.

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OPEC+ Cutting Oil Production | World In :60 | GZERO Media

Elon Musk buying Twitter would be good news for Putin

Ian Bremmer shares his insights on global politics this week on World In 60 Seconds.

Why is OPEC+ cutting oil production? Why is the US unhappy about it?

Well, unhappy about it because it's 2 million barrels a day off the markets, and that means higher oil prices. Why is OPEC+ cutting production? Higher oil prices. They used to say they liked 80, but now that it's been 90, 100 to 120 for a while. They like 90, 100, 120. So, they're pushing it up. I don't think it has anything to do with politics. I don't think it has anything to do with the midterm elections in the US. I think it has a lot to do with the Saudis and the Emirates and the Russians. Yes, part of OPEC+, they've got similar interests on this and they're still talking as a consequence, going to make life a little bit more difficult for the average consumer at the pump. That's what we're talking about. Big question is, do the Iranians still move ahead with an Iranian deal? I would say no, but by the way, they're the one country that you'd expect that would've recognized the annexation of the Ukrainian regions and the North Koreans did. The Iranians did not. Let's watch what happens over the next few days. It's an interesting one.

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UK Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng attend the annual Conservative Party conference in Birmingham, Britain

Hannah McKay via Reuters

What We’re Watching: UK PM's budget U-turn, OPEC mulls production cut, Yemen truce expires

Truss’s tax U-turn

Will it be enough? New British PM Liz Truss’s government has reversed course on its economic agenda. Chancellor Kwasi Kwarteng told the Conservative Party conference on Monday that a proposal to scrap the UK’s 45% tax rate for high-income earners would be axed. He cited the recent market chaos and vowed that there would be “no more distractions” in pursuing the rest of the government’s proposed tax policies. This caps a dismal couple of weeks for the new Tory leadership during which the Bank of England tried to calm markets after Kwarteng introduced £45 billion ($49 billion) worth of tax cuts despite sky-high inflation. The upheaval also caused the pound to plummet against the greenback (it regained some value on Monday). Truss and Kwarteng said they changed tack after listening to voters struggling amid the cost-of-living crisis. But it had become clear that the plan would have struggled to pass the House of Commons. The top tax rate accounted for just £2 billion of the proposed tax cuts, so this reversal will only go so far in placating opponents and markets. Truss addresses the party conference on Wednesday, and after her rocky start, we’ll be watching to see whether she can win support for her economic plan – and revive her party’s dismal approval rating enough to stay in the top job.

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Paige Fusco

The Graphic Truth: Who produces the most oil in the world?

US President Joe Biden is visiting Saudi Arabia, where he hopes to persuade Saudi and Emirati leaders to increase the production of oil in a bid to bring gas prices down. The US is a top oil producer, along with Saudi Arabia and Russia. But the Saudis have two things the US doesn't: a unique capacity to quickly ramp up production and a leading role in the OPEC group of oil producers (and OPEC+, which extends to Russia and others). Here's a look at how US oil production stacks up against what the Saudis and Russians are pumping.

Luisa Vieira

Crow on the menu during Biden’s trip to Saudi Arabia

US President Joe Biden is currently en route to the Middle East for the first time since taking office, and he’ll be making stops in Israel and the West Bank before making a more controversial swing through Saudi Arabia.

Yes, the same Saudi Arabia that, as a presidential candidate, Biden promised to treat like a “global pariah” because of the kingdom’s grim human rights record, its brutal war in Yemen, and the alleged involvement of the powerful Crown Prince Mohammed bin Salman in the 2018 murder of journalist Jamal Khashoggi.

But that was then, and this is now. With inflation soaring, midterm elections approaching, and prospects for a new Iran nuclear deal receding, Joe Biden is hopping on a jet to Riyadh with a few key issues in mind.

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An oil pump is seen at sunset near Reims, France.

REUTERS/Pascal Rossignol

Does the world really need more oil right now?

We’ve heard dire warnings in recent weeks from oil industry analysts and professionals about how already-high oil prices could rise to record levels in the coming months. Goldman Sachs has increased its price forecast for the second half of the year to $135 per barrel. Trading giant Trafigura predicted that prices could rise even higher to over $150 per barrel.

Underpinning these alarms are fears that the war in Ukraine will lead to a big fall in Russian crude production and exports. Ever since Russia invaded its western neighbor, markets have been on alert for signs of acute disruptions that would squeeze crude supplies.

But what if they are looking in the wrong direction? What if the fixation on the risk of a supply shock (losing Russian barrels) is diverting attention from a very real weakening of global demand for oil?

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Biden Wants Saudis to Increase Oil Production & Russia Out of OPEC+ | World In :60 | GZERO Media

Biden could get Saudis to push Russia out of OPEC+

Ian Bremmer shares his insights on global politics this week on World In :60.

What does Biden hope to come from his trip to Saudi Arabia?

Well, first he hopes he isn't smashed by progressives in his own party after saying when he campaigned that he wanted to make Saudi Arabia into a pariah internationally. Traveling to Saudi Arabia and visiting with Mohammed bin Salman doesn't do that, but of course, $120 plus oil doesn't do that either. Look, I think it's sensible for him to go. I'm glad he's actually making the trip. In particular, he wants to see the Saudis increasing their oil production beyond present announced quotas to reduce the price. It's impacting Americans at the pump with record levels right now. He'd love to see Russia thrown out of OPEC Plus. I think that's plausible and beyond that, the possibility that Saudi Arabia and Israel would formally open diplomatic relations, an extension of the Abraham Accords which was one of the biggest accomplishments in foreign policy of the Trump administration. Biden's completely aligned with that and I think he's going to try to push on that. So, I do think there will be some direct takeaways from this trip that'll be positive for the Biden administration.

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Albanese addresses supporters in Sydney after winning Australia's election.

REUTERS/Jaimi Joy

What We’re Watching: Australia elects new PM, Poland hearts Ukraine, Saudis stand by Russia

Albo takes over in Oz

After his Labor Party won Saturday's parliamentary election, Anthony Albanese, known popularly as Albo, is set to become Australia’s new prime minister. But it remains unclear whether Labor has a parliamentary majority: if his party falls just short in the end, it'll be a minority government, so Albanese will need some support from the Greens and climate-focused independents to get laws passed. In a gesture toward both, Albanese announced Sunday that he wants to make Australia a renewable energy superpower — a sharp departure from Scott Morrison, aka ScoMo, his coal-loving conservative predecessor. While mail-in ballots are still being counted, Albanese was sworn in Monday as acting PM in order to attend the Quad Summit in Tokyo on Tuesday. Albanese will need to hit the ground running because Australia is also in the AUKUS security partnership, which China doesn’t like one bit. Just weeks after Beijing inked a deal with the neighboring Solomon Islands that'll allow the Chinese to gain a military foothold in the Pacific, expect the China question to continue dominating Australian foreign policy under the new government.

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