Some media interpret the results of negotiations on energy issues in Jeddah between the US President Joe Biden and Saudi Crown Prince Muhammad bin Salman on July 15, 2022, quite incorrectly. First of all, this concerns agreements on the increase in oil production by Saudi Arabia.
Saudi Arabia did not promise to increase oil production by 50 percent, as some media have suggested. At the same time, its official representatives have emphasised that their country is interested in maintaining a stable situation on the global oil market and is ready to adequately respond in the event of its destabilisation – by raising its quota within the framework of OPEC+ upon coordination with other members of the cartel. However, today, such a need does not exist, as the daily supply of oil on world markets exceeds the demand by 1 million barrels.
Instead, Saudi Arabia expressed its readiness to increase the technical capabilities of daily production in 2027 to 13 million barrels instead of the current 12 million barrels. Today, this country produces about 11 million barrels/day, which makes Saudi Arabia the world leader.
So, at the moment, it would be incorrect to draw parallels with the situation observed in the 1980s, when the administration of then US President R. Reagan managed to convince the Saudi leadership to significantly increase oil production within a short period of time. It was one of the reasons for the collapse of world oil prices that contributed to the breakdown of the USSR. Currently, it is difficult to count on such actions of the Kingdom in relation to the Russian Federation due to the limited technological capabilities of Saudi Arabia and the absence of a significant economic interest in this, as well as due to the complicated relations between the US and Saudi Arabia after the assassination of the opposition journalist Jamal Khashoggi by the Saudis in 2018.
One should also keep in mind that in the period of cooling relations between these countries in 2018-2022, Saudi Arabia's foreign economic and political ties with China and the Russian Federation improved significantly. Doubling of Russian fuel oil deliveries to a power plant in Saudi Arabia in the second quarter of 2022 gave vivid evidence of preservation of special relations between Riyadh and Moscow, despite Russia’s aggression against Ukraine.
In the recent years, Saudi Arabia began implementing an energy policy intended to reduce the importance of the oil production industry in its economy by choosing a strategic course towards the development of "green energy". The country launched the Green Initiative in the Middle East and joined the Paris Climate Agreement, made international commitments to reduce methane emission. At the same time, Saudi Arabia is one of the founders of the environmental organisation Net-Zero Producers Forum and aims to achieve a 50% share of RES in its energy balance by 2030.
That is, there are no prerequisites now for Saudi Arabia to raise oil production to a level that could lead to a drop in oil prices by 30-40% from the current level. Nevertheless, the country will remain an influential actor capable of influencing oil prices in one or another way for a long time ahead. Based on the above, one should not expect the economic collapse of the Russian Federation due to the actions of Riyadh. Much more influential factors affecting the world oil market include the EU oil embargo, the macroeconomic policy of the US Federal Reserve, and the threat of a global recession.
