Oil Prices Shoot Up After China’s New Ally Saudi Arabia, OPEC Make Major Cuts to Production

Mohammed bin Salman Al Saud
Kremlin.ru, CC BY 4.0 <https://creativecommons.org/licenses/by/4.0>, via Wikimedia Commons

By Dr. Derek Ellerman

If it wasn’t bad enough that the recent failure of the Silicon Valley Bank has likely led the Federal Reserve to give up it’s fight against inflation (my prediction), the American people can expect yet another assault against their wallets. 

China’s newest ally Saudi Arabia and the OPEC oil cartel agreed to even more cuts to oil production, which has caused the price per barrel to jump. 

According to several outlets like MarketWatch, OPEC is going to cut well over a million barrels of daily oil production by next month. 

It’s yet another body blow for the already-battered working American. 

RELATED: The ‘Energy Transition’ to Green Is a Fantasy

Major Oil Production Cuts

Oil prices had been declining for the first half of last month, reaching about $67 per barrel, only to skyrocket right back up again to nearly $80 at the time of this writing. 

The move is particularly interesting given that Saudi Arabia just recently announced well over $10 billion in investments in Chinese energy production, something I believe to be an epoch-making shift in global power. The plan involves nearly 700,000 barrels a day to China. 

According to Reuters, OPEC was expected to keep their current oil production, and markets were “surprised.” 

I’m not so sure professional market watchers should have been surprised, given the earlier China deal. 

We’re looking at a total shift in the world’s centers of power. The unexpected should be expected – especially if it’s something to the detriment of the current hegemon – the U.S. – and benefits the rising power – China. 

UBS bank analyst Giovanni Staunovo told Reuters:

“The Sunday production cut was on no ones radar… With U.S. oil producers focused on capital discipline, OPEC+ remains in control of the oil market.”

It seems like he just perfectly explained why it should have been on everyone’s radar! 

RELATED: Massive Saudi Investments in China Signal Epoch-Making Shift in Global Power

American Oil Production

The whims of petro dictators would be far less consequential to a nation that is energy independent. 

While America currently uses about 20 million barrels of oil daily, we currently only produce less than 12 million barrels daily. 

To make up for that 8 million barrel shortfall, we import the bulk from Canada, but rely on Mexico, Saudi Arabia, and others. 

The truth is, if America was a serious country, we’d boost production ourselves. 

Alas, we “lack the refining capacity.” 

I did a quick search to see how roughly how much it costs to build a modern oil refinery. Apparently, Mexico just built one last year, at a cost of $18 billion. 

That is an incredible capital investment. And yet, just by cutting our welfare to the corrupt kleptocracy in Ukraine, we could have built five new refineries. 

The point is, the world as we see it is defined by choices people make. 

More accurately, the choices crooked politicians make, and the choices the American people make when they keep sending these same people to Washington. 

One thing seems to be pretty clear, though. Barring any earth-shattering changes in direction, oil is only going to get more expensive. 

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