Staff Writer
The world’s oil prices may rise as a result of Saudi Arabia’s announcement on Sunday that it will reduce oil production by 500,000 barrels per day from May through the end of 2023.
Higher oil prices would force Americans and others to pay even more at the pump amid inflation that is partly caused by that conflict and enable Russian President Vladimir Putin fill his coffers while his nation conducts war on Ukraine.
Additionally, it was anticipated to exacerbate tensions with the US, which has urged Saudi Arabia and other allies to raise output in an effort to drive down prices and pinch Russia’s finances.
Without naming them, the Saudi Energy Ministry stated that the reduction would be undertaken in collaboration with a few OPEC and non-OPEC nations.
The reductions are in addition to one made public in October of last year that enraged the Biden administration.
The ministry referred to the action as a “precautionary measure” designed to keep the oil market stable. The reductions amount to less than 5% of Saudi Arabia’s projected 11.5 million barrel daily average production in 2022.
The earlier cuts—of around 2 million barrels per day—had been made just before the U.S. midterm elections, in which the skyrocketing price of oil was a key issue. At the time, Democratic senators called for a freeze on cooperation with the Saudis, and President Joe Biden pledged that there would be “consequences.”
Both the U.S. and Saudi Arabia denied having any political goals in the disagreement and stated that their sole concern was to keep the market price stable.
Oil prices have actually trended down since those cuts. At the end of the previous week, Brent crude, a global benchmark, was trading at about $80 per barrel, down from about $95 per barrel in early October, when the initial cuts were decided.
Aramco, the state-run oil company of Saudi Arabia, just reported record
$161 billion in profits over the previous year. In comparison to the company’s $110 billion in revenue from 2021, profits increased by 46.5%. By 2027, Aramco stated it wanted to increase production to 13 million barrels per day.
