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Page added on October 27, 2016

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Would the US ever attend an OPEC meeting?

Public Policy

The recent invitation by OPEC for US officials to join in production freeze talks is clearly a nod to the production powerhouse Americas has become as a result of the shale revolution.

But it wasn’t always that way. Just ask former US Energy Secretary Bill Richardson, who, 16 years ago, was the point person in talks with Saudi Arabia to boost production, which would keep US gasoline prices stable.

Richardson’s tenure from 1998 through 2000 came at a much different time for both the US’ relations with OPEC and its role in the world oil market.

For one, the US was producing only about 5.9 million b/d and was in the midst of a historic supply decline that would crater at about 3.9 million b/d by October 2005.

In the spring of 2000, Richardson was urging Saudi Arabia through phone calls and what he called “quiet diplomacy” to orchestrate an OPEC production increase as the Clinton administration was worried about a crude oil price spike.

That price spike had brought prices to over $34/b, a level which roughly 15 years later would create a crisis for producers and a boon for consumers.

And OPEC has also changed significantly, Richardson said.

“It’s a different OPEC,” Richardson said in an interview with S&P Global Platts. “Today, they’re not unified, there are more players and while the Saudis are still the leaders, they’re no longer as friendly to us as they used to be nor can they totally dictate [prices].”

S&P Global Platts: Capitol Crude PodcastFor the full interview with Bill Richardson, listen to the Capitol Crude podcast here: ‘Quiet diplomacy’: The US relationship with OPEC oil production

Earlier this month, the Obama administration turned down an invitation from OPEC to join in the production freeze talks in Vienna.

The US government’s absence at the OPEC meeting will not be a surprise to anyone. Representatives of Texas and Alaska attended a meeting with non-OPEC  producers nearly 30 years ago and US producers have attended OPEC seminars in the past.

But attendance by a US government official would be “unprecedented,” said Bob McNally, a longtime OPEC observer and president of The Rapidan Group.

The US government has never participated in an OPEC meeting aimed at managing the market, McNally said. And with no direct control over US crude oil output, US government officials would have little to contribute at such a meeting.

In addition, the growth of US shale oil production has changed the way the US government views OPEC.

Bill Richardson’s oil diplomacy in 2000

When OPEC reached an agreement to boost production in March 2000, Richardson spent the days leading up to that agreement on the phone with Ali al-Naimi,  who was Saudi Arabia’s oil minister at the time. Richardson was tasked with getting the Saudis to broker an OPEC-wide production increase to help counter the increase in crude oil and gasoline prices in the US.

Richardson told S&P Global Platts that his diplomatic focus at the time was almost exclusively on Saudi Arabia and always focused at balancing the market.

“My diplomacy was always aimed at the Saudis who were the major player in OPEC and, at that time, they always helped us,” Richardson said. “I’ve got to say that they always would listen to my pleas to either cut production, increase production or leave production alone. Our objective was to stabilize prices.”

But despite his frequent phone calls and visits with Saudi Arabia and other OPEC producers, Richardson said he would have also rejected an invitation to take part in an OPEC meeting at the time, as the Obama administration did.

“I would have rejected it also because our policy has always been to let the market dictate prices not OPEC and not production increases and production cuts,” Richardson said.

At the same time, the importance of OPEC decisions have seemingly less relevance to US policy, at least at the White House.

A day after the 2000 OPEC decision, President Clinton led off his news conference calling it “good news for our economy and for the American consumer.”

By comparison, during a September 29 press briefing, held a day after OPEC announced the possible agreement to cut production, White House Press Secretary  Josh Earnest did not mention OPEC nor oil prices and was not asked a single question about it.

The relationship has changed for the better, Richardson said.

“It’s better for us,” he said. “We don’t want to be subject to the volatility of the Middle East, but we still have to be conscious of our friends. We want our friends in the Middle East, like the Saudis, like the UAE, like Qatar, to have good relationships with us.”

Platts



7 Comments on "Would the US ever attend an OPEC meeting?"

  1. Plantagenet on Thu, 27th Oct 2016 1:01 pm 

    Iraq and Iran are refusing to cut oil production to end the oil glut so KSA wants the USA and Russia to cut.

    If the saudis want the oil glut to end so bad why don’t THEY cut their oil production

    Cheers!

  2. rockman on Thu, 27th Oct 2016 3:05 pm 

    To follow up on Plant’s comment: why should anyone, including OPEC countries, go to such a meeting? There won’t any decisions made at the time. For instance Russia, after hearing a Saudi speech isn’t going to suddenly jump up and say “Damn, we never thought of that! Hell yeah we’ll also cut production.” LOL.

  3. Apneaman on Thu, 27th Oct 2016 3:18 pm 

    When was the last time OPEC had a production cut or freeze? And how many tens of thousands of speculative articles, leaning one way or another, have been puked up since then?

  4. Boat on Thu, 27th Oct 2016 3:20 pm 

    You can add Libya and Nigeria to the refusal to cut group.

  5. GregT on Thu, 27th Oct 2016 3:59 pm 

    The supposed Oil Glut™ could be ended very quickly, if the US itself cut the production that it ramped up due to historically high oil prices. Of course much of the increase in US oil production is no longer profitable at todays still high prices. So no need to worry. It’ll all work itself out, eventually.

  6. Anonymous on Thu, 27th Oct 2016 6:09 pm 

    Good thing no one listens to your ‘expert advice’ boat. Libya exists only on paper these days(thanks amerika\israel) and Nigeria’s(oil) is basically controlled by western oil corporations.

    Maybe ya shoulda googled that before opening your yap again, right moron?

  7. joe on Thu, 27th Oct 2016 11:09 pm 

    The oil world today is a Mexican standoff. Oil is weapon as much as planes and jihadis. Man do you guys realise just how manipulated we are? Opec is just another propaganda tool. Opec is Saudi, even with America and Russia in it, and no, the keeper of the holy places wont allow the west to dominate Opec it would look bad.

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