2023-09-25 04:30:14
Saudi Arabia’s Crown Prince Mohammed Bin Salman, Indian Prime Minister Narendra Modi and US President Joe Biden during the G20 summit in New Delhi, September 9, 2023. EVELYN HOCKSTEIN / POOL / AFP
Never have the Saudis lived up to the nickname “oil kings” so well. They have regained control of the black gold market, with the active support of Russia. And if we want clear proof of this, we just need to recall the enormous profits of the national company Saudi Aramco: 161 billion dollars in 2022 (around 150 billion euros), or as much as the cumulative profits of the companies of the CAC 40 in France. With the price of a barrel having increased by 25% since the end of June to approach 100 dollars, the windfall continues to rain on a kingdom which is moving step by step towards a more open society and a more diversified economy.
Included in the Vision 2030 plan of Crown Prince Mohammed Ben Salman, known as “MBS”, this ambition has a very high cost, financed by its main resource. Suffice to say that oil, exploited since 1938, has never been so crucial. Riyadh will do everything to extend production as long as possible, relegating the fight against global warming to second place. The Saudi Minister of Energy confirmed this on Monday, September 18, in Calgary (Canada), at the World Petroleum Congress. Yes to the energy transition, underlined Prince Abdel Aziz Ben Salman, half-brother of MBS, “but ensuring that energy is still affordable and does not constitute an obstacle to transition, economic prosperity and growth”.
Saudi Arabia dominates the Organization of the Petroleum Exporting Countries (OPEC), which was expanded in 2016 to include thirteen other producers led by Russia. Far from having broken up after the Russian invasion of Ukraine, this informal OPEC+ cartel took control of the market, abandoned by American producers of shale oil (“shale oil”) whose financiers are more eager for dividends than production growth. The Saudis and Russians, the world’s first and second exporters, tightened the valves this summer to keep the price high, at least $90 if possible.
Circumstances reconciliations
The world burns more crude than it pumps; and OPEC itself forecasts a supply deficit of 2.7 million barrels per day (out of 103 million) between October and December. Saudi Aramco, which extracts 10% of the world’s crude, is the only one capable of putting large quantities of additional black gold on the market. But Riyadh will not move, unless prices soar to the point of threatening economic growth; and there is no doubt that he will tighten the floodgates if prices plunge again. None of the American pressure for a rebound in production has made MBS bend. Including the disastrous trip of US President Joe Biden to Jeddah in July 2022.
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