The Wall Street Journal: Oil is a risky game for Saudi Arabia

US President Donald Trump and Saudi Crown Prince Mohammed bin Salman are playing a dangerous game, the consequences of which may be disastrous for the US oil industry and for the bilateral relations between the United States and the Kingdom.

In an article published by the American Wall Street Journal, writer Karen Elliot House says: Trump supported the Saudi crown prince when he severed ties with Qatar, and stood by his side strongly when he was involved in the assassination of journalist Jamal Khashoggi, but that did not prevent Muhammad bin Salman from threatening the American oil industry and the interests of the United States, and even the interests of his ally Donald Trump who is preparing for the race to stay In the second presidential term.

She pointed out that Mohammed bin Salman decided last March to flood the world market with oil. In order to pressure Russia, this coincided with the Corona pandemic that struck the world, which led to a historical decline in oil prices.

Trump subsequently intervened and persuaded Saudi Arabia, Russia, and major oil producers to cut production, but the OPEC Plus move did not change the landscape much, as prices remained at the lowest levels as demand for oil worldwide fell.

The writer emphasized that the risks increase day by day to President Trump and his ally, the Saudi Crown Prince, as the position of the United States as the world's largest oil producer is eroding, and its self-sufficiency is being eroded, while Saudi Arabia faces its worst financial disaster in many years, in light of the stability of oil prices at thirty Dollars a barrel, and worse, it may not find enough support at the current circumstance of its American ally.

But the author believes that there is a possibility to correct the situation, whether with regard to restoring oil prices to the previous era, or reducing tension in bilateral relations, and this requires - from her point of view - swift measures from the Saudi crown prince, and response from the American president before the "OPEC Plus" summit. Next June 10.

And she considered that Bin Salman and Trump can work together to restore stability to the global oil market, but if they continue to play a dangerous "poker" - as she put it - they will lose a lot.

 Insufficient cut
Trump played a strong card last week when his administration announced the withdrawal of the Patriot missile batteries that were sent earlier to guard Saudi oil facilities that had been attacked by a drone. Within a day, the crown prince vowed to cut production, but not enough to rebalance supply and demand on a global scale.

Analysts believe that the recent crisis and bankruptcies will reduce US shale oil production to about 20% by next December.

But the risks for the Saudis will be greater than that - according to the article - as the crown prince faces a huge financial deficit, while he needs the price of a barrel of oil to be in the range of eighty dollars in order to finance government spending at its normal levels.

It is expected - according to the author - that the financial crisis will put an end to his ambitious plan, "Vision 2030", which aims to reduce the dependence of the Saudi economy on oil.

Saudi Arabia recently announced "painful" austerity measures, abolishing the cost of living for government employees, and doubling the value-added tax three times, to 15%.

 Punishing Saudi Arabia
Trump still plays the game brilliantly, as withdrawing the Patriot missile batteries from Saudi Arabia does not mean that the Iranian threat has diminished, but political support for Saudi Arabia from Republican representatives from the oil-producing states has diminished.

In a warning to Riyadh, Texas Rep. Ted Cruz said, "If you want to act like our enemies, we will treat you as enemies."

The author concludes by saying that the Saudis should reduce oil production for three main reasons: The first is that the abundance of supply in the market will force them to reduce production because there is no room to sell it. Second, the decline in US support will increase Iran's intransigence and place Saudi Arabia in imminent danger. Third, Trump's declining chances of winning a new term mean simply the victory of Democrats who are eager to punish Saudi Arabia for human rights violations and look to improve relations with Tehran.