OPINION:
In relentless pursuit of American strategic energy dominance, Donald Trump made the United States a net oil exporter while his peace through strength doctrine contained Vladimir Putin’s revanchist ambitions. Pursuing a Green New World, President Biden has rapidly achieved strategic energy subservience while transforming Mr. Putin from a contained wolf to an unchained jackal now wielding enormous power over world energy markets.
For more than 70 years, the global oil patch was largely ruled by a U.S.-Saudi Arabia “oil for security” pact: America promised to protect Saudi Arabia from its numerous enemies in the region while the Saudis cooperated in setting oil prices. Of course, once Mr. Trump achieved U.S. energy dominance — and surpassed Saudi Arabia as the world’s largest petroleum producer — America assumed the dominant role in setting oil prices — OPEC be damned.
Here, I personally remember, on more than one occasion, Mr. Trump calling the Saudi king and letting him know that oil prices had gotten too high and they needed to turn on the production spigot. He always did.
Mr. Biden has screwed this critical strategic relationship up every which way since Sunday. During the 2020 presidential campaign, candidate Biden promised to stop Mr. Trump’s arms sales to the Saudis — sales I myself had worked hard on to create American manufacturing jobs.
Candidate Biden also made much political hay of the role of Crown Prince Mohammed bin Salman in the assassination of Jamaal Khashoggi. The Saudis got Mr. Biden’s menacing message — look for friends and security elsewhere.
Today, with Mr. Trump’s strategic energy dominance in their rearview mirror, it is a Saudi-Russia duo now calling the oil price shots. With Russia, the world’s third-largest petroleum producer behind only the Saudis and U.S., Saudi Arabia and Russia are the tails now wagging the OPEC cartel dog.
You would not have found a single Western analyst who would have foreseen this outcome when Russia invaded Ukraine. The United States, together with Europe and other allies like India and Japan, would quickly crush the Russian economy by refusing to buy their oil and gas. Of course, this conventional thinking quickly gave way to realpolitik.
Countries around the world — American friends and foes alike — need their oil and natural gas, and none wanted to endure the political pain of higher energy prices that would be necessary to crush Russia. So Russian oil quickly leaked onto world markets — not just to rogue states like China but also to putative allies like India, Japan, Europe and even here to the United States.
What Mr. Putin and the Russians have learned is that oligopolistic production cutbacks work. They work only because the United States no longer has the productive capacity to surge petroleum into the market to offset such cuts. Today, at the right price, Russia can gain more revenue even while it sells less oil.
One must ask here whether Mr. Putin must be declared the ultimate chess master for seeing this seemingly odd result in advance and therefore having no fear of invading Ukraine. Or maybe he just got lucky. Either way, America under Mr. Biden is now at the mercy of Saudi Arabia and Russia.
This should chill your bones: In order for the Saudis to balance their budget — they spend lavishly on social programs to buy off the restless masses — they need oil prices to be at about $80 a barrel. To pay for its war machine, Russia needs oil to be at about $100 a barrel. Perhaps not coincidentally, oil prices are forecast to average as much as $90 for the next several years — the midway point between Saudi and Russian fiscal needs.
Contrast this new American energy future with the roughly $60 a barrel averaged during the Trump years, and you quickly see what an inflationary shock this has been. If current forecasts hold, the Saudi-Russian cartel will likely add 1% to 2% to the U.S. inflation rate, which is already high.
Our gross domestic product growth will also take a hit. When Americans pay more for gasoline, that’s less to buy other growth-producing goods and services, from clothes and food to entertainment and travel. It’s a zero-sum recessionary game.
Plus, the extra money American consumers and businesses have to shell out goes right into the pockets of countries that, at best, hate us and, at worst, want to destroy us. That’s a pure negative wealth transfer.
This, then, is Mr. Biden’s brave new green energy future. We are both poorer and less safe. Absent a quick mid-course policy correction, this will end badly. Elections do indeed have consequences.
• Peter Navarro served as former President Donald Trump’s manufacturing czar and chief China hawk. This article originally appeared in his Taking Back Trump’s America Substack.
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