STEVE INSKEEP, HOST:
It is reasonable to expect gas prices to climb soon. OPEC+, a group of oil-producing nations and their allies, voted to cut production last weekend. The laws of supply and demand apply here. If you cut the supply, you may push up prices depending on what else happens. This is an old, old, old, old story. The oil cartel led by Saudi Arabia tweaks production in some way. And if Americans dislike it, they complain. Just last fall, President Biden warned the Saudis of consequences for cutting production. Ellen R. Wald argues that we're thinking about this old story a little wrong. She's at the Atlantic Council, which is a think tank. And she wrote the book "Saudi, Inc." Welcome to the program.
ELLEN R WALD: Thanks for having me.
INSKEEP: What are we missing when we think about the story that way?
WALD: Well, we seem to be very much stuck in the 1970s, 1980s, even 1990s view, where America is a huge oil importer. We're a big oil consumer. And we depend on Saudi Arabia and also OPEC to modulate oil prices. And that's really no longer the case. Yes, America is still the largest oil consumer in the world. But we're also the largest oil producer in the world right now. And we have been for several years. And so we no longer importing the same amount of oil. In fact, we're a net oil exporter. We export lots of crude oil and oil products. And so we need to change the way that we think about our role in the oil market. And I think we could better utilize some of our positions so that we could impact oil prices and not just sit back and let OPEC do all the oil manipulating.
INSKEEP: Well, what does that mean? Does that mean that if OPEC+ cuts production by 1.6 barrels of oil per day, the United States could jack up production?
WALD: That's definitely an option. In fact, we saw that happening a lot during the big shale oil boom several years ago. Right now, the industry really isn't in a position, in terms of the amount of capital it has access to, to suddenly just increase production. But there are definitely things that we could do from a government perspective in terms of how we're regulating the industry and how we treat the industry that would certainly make it possible for our oil production to grow. We could also do things on the demand side.
In fact, before OPEC made this decision to voluntarily cut their production, the United States has been talking about making some really big purchases of oil to refill the SPR. And then they suddenly just turned around and said, oh, we're not really prepared to do that now, even though we said we were. So we have the ability on both the supply and demand side to potentially impact prices. We're just not doing it. Instead, we just kind of complain to Saudi Arabia and get mad at them. And that's not really a productive way to look at things.
INSKEEP: I'll just define a term. You said SPR, the Strategic Petroleum Reserve. And I guess the U.S., if it's buying oil to put in or taking oil out, that can affect oil prices, of course. In the past, it seems to me that American presidents have been able to call up the Saudis and say, listen; I need a little help here. I need you to keep production high. And it seems they have been cooperative, not all the time, but at crucial times in the past in ways that seem really against their short-term interests, but better for the U.S. or better for the U.S. view of the world. Are the Saudis less willing to be compliant in that way these days?
WALD: I think they are. And I do think part of that has to do with the fact that the U.S. is no longer Saudi Arabia's most important customer. Right now, that's China. Saudi Arabia exports a lot of oil to China. It just signed some brand-new deals with Chinese companies that will tie up at least 600,000 barrels a day of oil production in the coming years. So they're really much more oriented toward China and what China is doing. And if they're concerned, maybe, about China's demand, then that might give them reason to kind of cut production for a little while and be more concerned about what's going on in China as opposed to what's going on in the United States.
INSKEEP: Are they being an ally to China, then, or just looking after their own bottom line, their own interests?
WALD: I'd say they're mostly looking after their bottom line. And right now, that's not just the United States, that's China. That's also maintaining a good producer-producer relationship with Russia. And the United States might not like that, but that's the reality of the situation now.
INSKEEP: Well, I should just ask very briefly, is it good for Russia when production is cut like this?
WALD: Right now, that seems to be what Russia wants to do to push up oil prices. So yes, Saudi Arabia and Russia are definitely cooperating in there.
INSKEEP: Ellen R. Wald, who wrote the book "Saudi, Inc." It's a pleasure. Thanks so much.
WALD: Thank you. Transcript provided by NPR, Copyright NPR.