The ‘Oil Grand Bargain’ Isn’t Mere Fantasy
Thinking the unthinkable is useful, especially when the global oil market’s three kings are involved.
Coming back to the table.
Photographer: Martin Divisek/Bloomberg
Listen to US President Donald Trump and it’s inescapable that he favors low energy prices. “Bring down the cost of oil,” he told OPEC+ last month. “You gotta bring down the oil price,” he added a day later. Yet behind the bravado, America has more in common with Saudi Arabia and Russia than the cheap-energy discourse suggests.
The US today by far is the world’s largest petroleum producer, pumping nearly as much as Saudi Arabia and Russia combined. Ultra-low oil prices could be as bad for the country economically as sky-high prices.
It's not just Texas. From Colorado to New Mexico to Alaska, oil is a significant part of American capitalism’s success. As a percentage of US gross domestic product, the oil sector has the largest share in 35 years, according to World Bank estimates.
Can America work together with the Saudis and the Russians? Call it the “oil grand bargain” — a pact to keep energy prices within a range that works for three countries that, historically, were antagonistic.
It may be fantasy geopolitics, but it isn’t mere science fiction. In a world where the White House is — or, at the very least, sounds — closer to the positions of the Kremlin than at any other time, thinking the unthinkable is useful, including in oil.
Russian President Vladimir Putin clearly thinks the trio should work together, pointing to historical precedent. “I still remember the conversation by phone between three of us: Your humble servant, the US President Trump and the King of Saudi Arabia participated,” Putin told state television in February. He advocated for a repeat of those talks, which took place in April 2020. “The three of us talked on the phone and discussed the global energy market. Discussing these issues in such format is still in demand today.”
Trump certainly was keen five years ago. During the Covid-19 pandemic, the White House hosted at least two conference calls including King Salman bin Abdulaziz, Trump and Putin. And there are other precedents. Back in 1986, the White House reached out to Saudi Arabia to complain about reduced oil prices. Riyadh was flooding the market at the time, driving prices to ultra-low levels to restore discipline inside the OPEC cartel.
Yet transitioning to day-to-day collaboration from emergency conversations requires resolving huge obstacles, price being the most obvious. The US, Saudi Arabia and Russia may not benefit from very low oil prices — say, $50 a barrel and less, like those witnessed during the depths of the pandemic. But I don’t think the three agree on what a “reasonable” price is.