Biden Plays the Fool and Pawn to Russia’s Oil King

Transcript of Peter Navarro's Taking Back Trump's America Podcast

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In relentless pursuit of an 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, Joe Biden has rapidly achieved strategic energy subservience while transforming 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 US-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 Trump achieved US energy dominance – and passed 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 President 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. The King always did.

Joe Biden has screwed this critical strategic relationship up every which way since Sunday. During the 2020 presidential campaign, candidate Biden promised to stop 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 about the role of Crown Prince Mohammed Bin Salman in the brutal assassination of Jamaal Khashoggi. The Saudis got Biden’s menacing message – look for friends and their security elsewhere. 

Today, with Trump’s strategic energy dominance in their rear-view 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 US, 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 bad guy rogue states like Communist China but also to putative allies like India, Japan, and Europe and even here to the United States.

What 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 revenues even while it sells less oil.

One must ask here whether Putin must be declared the ultimate Chessmaster 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 Joe 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 Saudi 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/bbl.  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 one to two percent to the US inflation rate, which is already high.

American GDP 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 Joe Biden’s brave new green energy future. We are both poorer and less safe.  Absent a quick midcourse policy correction, this will end badly.  Elections do indeed have consequences.

Peter Navarro. Out.

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