The United States, China and Saudi Arabia are the focal points of the silent war on oil. Currently, China is clearly ahead of the West.
Despite all the attempts at increasing renewable energies across the world, there is one source of power that still remains the most crucial and important: oil.
With oil, nations not only power their economies, but they can also create further commodities that then supply their citizens. Oil is in many aspects the basis of our modern economy, and oil suppliers know it.
After the Russian invasion of Ukraine erupted, another, silent war broke out. A global war, spanning from China to Saudi Arabia, from Europe to the United States. A war about the control, the price and the supply of oil.
As the author Simon Watkins pointed out, a $10 difference in the price of a barrel of oil represents a 25-30% change in the price of gasoline. This represents a change of $25-30 billion in annual consumer spending in the United States.
For this very obvious reason, then, the United States wants to keep oil prices as low as possible.
The US, however, possesses “only” 2.1% of the world’s global reserves of oil and export relatively small amounts abroad. This also means that the US has little saying in the pricing of oil itself.
Saudi Arabia, on the other hand, is the largest exporter of oil and de facto leader of OPEC (Organization of Petroleum Exporting Countries). And while Saudi Arabia was a close friend of the US until a few years ago, the wind is changing.
Sino-Russo-Arabic alliance
After Russia’s invasion of Ukraine and the implementation of a $60 price cap on Russian oil, Saudi Arabia suddenly found itself with a new court of beggars. While, as we said, the US needed Saudi Arabia to increase oil exports and decrease prices, Russia wanted the exact opposite.
And, as it turned out, Saudi Arabia was intrigued by the Russian proposition of cutting oil supplies while also selling oil to Moscow at a discount. Essentially, Saudi Arabia and Russia formed an “oil alliance” to the detriment of the United States.
A further, extremely important player is China. Beijing is now the largest buyer of Russian oil, though Chinese purchases are bought with a high degree of discount. Russian oil is simply not competitive anymore, now that half of the world does not want to buy it. China knows how much Russia relies on its oil exports for its economy, therefore “vassalizing” Moscow and its vast resources.
And China is also making friends with Saudi Arabia, trying to convince them to ditch the US dollar and trade oil with the Chinese yuan instead.
Essentially, as the United States tries to keep their hold on Saudi oil, the sheiks are dealing with Russia and China instead. This could mean higher oil prices for the West and larger, discounted oil influxes for the East.
Oil is still far too important for the United States to afford losing this war. They will either have to become more imposing or will have to make concessions with Saudi Arabia and China.
Without oil, none of these economies will be powered. And the US is losing the race.
