Updated Sep 6, 2023 - Energy & Environment

The Saudis will have a say in U.S. elections

Data: FactSet; Chart: Axios Visuals

Saudi Arabia's extension of oil production cuts until the end of 2023 or longer helps ensure energy prices will become an election 2024 debate.

Why it matters: U.S. gasoline prices, which have been on the rise, are closely tethered to global oil prices. Meanwhile, the presidential campaign season is heating up — and voters already give the White House low marks on the economy.

  • If sustained, "crude price strength could weigh on President Joe Biden's re-election bid," ClearView Energy Partners said in a note.

Catch up fast: The kingdom said Tuesday morning it's keeping the current reduction of 1 million barrels per day in place for another three months, subject to monthly review.

  • Russia, meanwhile, extended its 300,000 bpd export cut for the same time.

Driving the news: Tuesday's news helped push Brent crude prices above $90 per barrel (see above), their highest since November 2022.

What they're saying: "These bullish moves significantly tighten the global oil market and can only result in one thing: higher oil prices worldwide," Rystad Energy analyst Jorge Leon said in a note.

State of play: U.S. gasoline prices are averaging a little over $3.80 per gallon. Although far below 2022 peaks around $5 per gallon, it's enough to create pain for consumers and a line of attack for Biden's GOP opponents (which happened in the first debate — even though they're far below 2022 peaks).

The intrigue: While the White House has bashed some previous Saudi cuts, officials held their fire this time.

  • "I would point out that what was announced today was a continuation of an existing [Saudi] policy," national security adviser Jake Sullivan told reporters.
  • He added that Biden's "just trying to do everything within his toolkit" to lower prices.

Between the lines: Earlier in the day, ClearView said the lack of open criticism "might reflect the broader White House goal of normalizing relations between Israel and Saudi Arabia."

The bottom line: Markets and politics are never far apart.

Go deeper