Biden’s Next Gamble Part-1: Supplying American Crude Oil To Europe

Six months ago, America was mired in rare, soaring inflation the likes of which the country hadn’t seen in decades. The reason: rising energy costs. This was made worse by a sluggish economy still trying to overcome the ravages of the Wuhan virus pandemic. The net result was a debilitating situation in which the average American was simultaneously battered by both listless income levels and rising prices.

President Joe Biden chose to tackle this worrying issue in November 2021 with a grand gamble. It had three parts.

One, he released a few million barrels of America’s strategic petroleum reserves, in the hope that this would bring international oil prices down to more reasonable levels.

Two, he expected that a reduced crude oil price (roughly floating in the $60-70 per barrel spectrum) would in turn reduce America’s energy cost-driven inflation.

And three, he presumed that a stable, rational oil price would allow the resumption of aggressive investments and operations in the domestic petroleum sector. This would dramatically increase oil production from tight sands (colloquially called ‘shale oil’), and give a sizzling boost to America’s economy like nothing else ever can.

Unfortunately, Biden’s gamble flopped disastrously. The international crude oil price continued to rise, as did inflation in America, and the economy remained enervated.

One reason why Biden’s great gambit fell on its face is because global oil demand was severely muted due to the pandemic. Another reason is that the world was actually in the thrall of an oil glut not seen in a century.

Indeed, the only reason why there was even some marketability for American crude from tight sands in the first place, was because Biden’s predecessor, Donald Trump, had managed to forcible truncate oil flow from major producers like Iran, Venezuela and Libya to some extent, and garner new buyers like India and China.

It is, in fact, rather amazing that think-tankers, policy wonks and commentators even expected Biden’s gamble to be successful. Swarajya didn’t, and said so the very week Biden grandly announced the release of strategic reserves in November 2021.

With that in mind, what is one to make of last week’s biggest news – Biden’s decision to release 180 million barrels of oil from the strategic reserve, at the rate of a million barrels a day for the next six months?

Prima facie, you’d think that this was a lunatic second attempt at a failed plan because the Biden administration had run out of ideas (exactly when inflation was setting a four-decade record!).

But no, this is a very different play, in very different circumstances, with very different outcomes sought. And understanding this new American move will also help readers understand why Biden ratcheted up the confrontational rhetoric so abruptly, and so furiously, and pushed and pushed so relentlessly on Ukraine joining NATO, until Russian President Vladimir Putin was left with no option but to invade.

(Curiously, and contradictorily, don’t forget that this was the same Biden administration which formally approved Russia’s Nord Stream-2 gas pipeline to Germany in May 2021. Where was the animosity towards Russia then?)

So, what are Biden’s political objectives?

One, America seeks to soon become Europe’s principal supplier of oil and gas. By this aim, Europe’s severe dependency on Russian energy would come to an end.

Two, it seeks a dramatic rupture in global oil trade, to secure one of the world’s largest and most lucrative energy markets for itself.

Three, it seeks to bring OPEC to heel by matching oil exports barrel for barrel, and to thereby make Russia’s control over OPEC redundant.

Four, it seeks to regain the power to set the global oil price – a weapon much more powerful than bullets and bombs; and a power which it gradually lost to Russia in the first decade of this century.

Five, by corollary, it seeks to ensure at the very least, that even if it is finally unable to fully control energy prices, markets, and supply, it would greatly enfeeble the power of others to do so (mainly Russia and Saudi Arabia).

All of the above could possibly come to pass, now that Russia is once again the evil empire, Putin is a monster, and there is a tender Ukrainian ewe desperately awaiting rescue by the West, from the hungry talons of a big bad bear – as per the heady, ongoing mainstream media narrative, of course.

Thanks to the ongoing conflict in Ukraine, any number of economic, strategic, and moral reasons are now available at hand, to be skilfully leveraged and employed, as the rationale for the most dramatic shift in energy trading patterns which the modern world has seen.

Europe’s energy dependency on the Middle East first, and later Russia, goes back to before the First World War (which was in fact triggered in part when Winston Churchill, as Britain’s First Sea Lord of the Admiralty, forced the Royal Navy’s capital ships to more fully shift from Welsh coal to furnace oil from Persia).

To think that there might soon come a day, when the quays of Rotterdam or Hamburg don’t need to play host to super tankers filled with Kuwaiti crude, is a staggeringly paradigmatic thought which demands detailed analysis.

Thus, the key question, of whether Biden’s next gamble can, and may, pay off or not, will be answered in a companion piece, using a host of data and metrics.

Also Read: Explained: Top Seven Takeaways From Russia Offering Crude Oil To India At Heavily Discounted Prices