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Getting more oil from Saudi Arabia or the UAE could require U.S. concessions

CNBC's anchor and session moderator Hadley Gamble, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman, Iraqi Kurdistan Regional Government Premier Masrour Barzani, and the United Arab Emirates' Energy and Infrastructure Minister Suhail al-Mazrouei attend a session titled "Is the World Ready for A Future Beyond Oil?" at the World Government Summit in Dubai on March 29.
Karim Sahib
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AFP via Getty Images
CNBC's anchor and session moderator Hadley Gamble, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman, Iraqi Kurdistan Regional Government Premier Masrour Barzani, and the United Arab Emirates' Energy and Infrastructure Minister Suhail al-Mazrouei attend a session titled "Is the World Ready for A Future Beyond Oil?" at the World Government Summit in Dubai on March 29.

Updated March 31, 2022 at 5:18 PM ET

Oil prices are high, driving up the cost of gas and other inflation in the U.S. and elsewhere. OPEC+, a group of nearly two dozen oil-producing countries, including Russia, agreed Thursday to a modest bump in the amount of crude it pumps starting in May. But that's not expected to have much impact.

President Biden announced the release of a major amount of oil from emergency reserves the U.S. holds to relieve some of the price pressure — a move the country usually tries to avoid.

The administration has been seeking for Saudi Arabia and the United Arab Emirates to make a significant increase in oil production as a way to calm soaring prices. But relations between the U.S. and the two Gulf nations have been souring recently.

Biden has made no bones about his feelings for Saudi Arabia's Crown Prince Mohammed bin Salman. His administration blamed the killing of Saudi journalist Jamal Khashoggi on the crown prince, which the royal denies, and Biden has refused to deal with him directly.

Now the crown prince has leverage.

"Right now he has the upper hand in the sense that he has ... almost a unique ability in the world to influence substantially the price of oil," says David Rundell, a former U.S. diplomat with three decades of experience with Saudi Arabia, and author of the book, Vision or Mirage: Saudi Arabia at the Crossroads.

He says increasing oil production would require the Saudis to break an agreement with OPEC and its allies, including Russia. But the Saudis have rebuffed those requests from the U.S.

"Partly because if they did that, nobody would make a deal with them in the future," Rundell says, explaining it could mark the end of OPEC. "So unless all the OPEC people and Russia get together and make a new deal, they'll stick to their old deal."

Then-U.S. Charge d'Affaires David Rundell (second left) walks on the tarmac with then-Defense Secretary Robert Gates and Saudi armed forces official Ibrahim Al-Malik, at Riyadh International Airport, Saudi Arabia, May 5, 2009. Gates was on a trip to discuss Washington's diplomatic approach to Iran.
Jason Reed / Pool/Getty Images
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Pool/Getty Images
Then-U.S. Charge d'Affaires David Rundell (second left) walks on the tarmac with then-Defense Secretary Robert Gates and Saudi armed forces official Ibrahim Al-Malik, at Riyadh International Airport, Saudi Arabia, May 5, 2009. Gates was on a trip to discuss Washington's diplomatic approach to Iran.

It's about more than just oil

But some Saudi watchers think the kingdom's reticence to increase oil production is about more than just honoring an OPEC agreement. Earlier this month, The Wall Street Journal reported that the crown prince had declined to take a phone call from President Biden, a report that the White House later denied. The royal has also refused to go along with sanctions on Russia or condemn the invasion of Ukraine.

"The crown prince ... has a very big ego and he was personally humiliated by Biden," says Yasmine Farouk, with the Carnegie Endowment for International Peace. "What's happening, of course, this is payback time."

Farouk says Saudi Arabia feels its security concerns are being ignored by the U.S. The kingdom has asked for more help confronting Iran-backed Houthis in Yemen. Biden stopped supporting offensive operations for the Saudi-led war in that country.

Farouk says the crown prince, known as MBS, has grown frustrated with the U.S. "You see, in MBS's head, it's, 'What is it good for if you're the strongest military in the world but I cannot benefit from that? You're withholding the arms I want, you're withholding the systems I want. And you do not respond when I'm attacked.' "

Certainly keeping oil production low keeps prices higher and that brings more money into the kingdom's coffers. Ahmed al-Omran, a Saudi journalist who runs the newsletter Riyadh Bureau, says the Saudis may have calculated that rebuffing the U.S. request is something they can afford to do.

"For them, it's probably a moment where they have leverage they can use to try to achieve their goal and get what they want from the American side," he says.

The White House move to release emergency oil reserves could stand in place of Saudi increases, but it's not something the U.S. can do too often without depleting its reserves.

An oil pump jack pulls oil from the Permian Basin oil field on March 14, in Odessa, Texas.
Joe Raedle / Getty Images
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Getty Images
An oil pump jack pulls oil from the Permian Basin oil field on March 14, in Odessa, Texas.

There might be room for compromise

The United Arab Emirates also has security concerns and has balked at producing more oil as the U.S. requests.

Several Biden administration policies have angered the Gulf nations, including U.S. efforts to rekindle the Iran nuclear deal.

Kirsten Fontenrose is president of the defense firm Red Six International, which includes the UAE among its clients. She says the U.S. could appeal to the UAE and Saudi Arabia by redesignating the Houthis as a terrorist group. Or it could pursue some public diplomacy.

"Certainly if Biden got on a plane and made a visit to the region and included Saudi in that visit, that would be one thing that would move the needle quite a bit," she says. "And then providing additional assistance on the war with Yemen would be great."

A spokesperson said the State Department won't comment on discussions with the Gulf nations. The Saudi and UAE embassies in Washington also declined to comment for this story.

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