Energy war, 62 years of global oil bargaining power

Recently, OPEC+, which accounts for more than 50% of global oil production, announced a sharp cut from November this year, cutting monthly production by an average of 2 million barrels per day from August production – equivalent to 2%
of global oil demand per day.

The production cut caused a fierce reaction from
the United States.

In the past few months, the Biden administration has asked the oil-producing countries in the "OPEC+" to increase production
by co-opting and pressuring.
To this end, in mid-July, Biden also visited the Middle East
.

The Biden administration hopes to let international oil prices fall by letting OPEC+ increase production to ease inflationary pressures
in the United States.

When gasoline prices fell in the United States, Biden also bragged about it on social media, and his pride was full of words
.

But when the news of the "OPEC+" production cut came out, that week, international oil prices recorded the largest weekly increase since March this year
.

This was immediately interpreted by the US media as a "failure of US diplomacy"
.

Not only that, this production cut is also a failure
of the United States in oil bargaining power.

62 years ago, it was precisely because of the confrontation between the Middle East oil producers and the United States and the West that OPEC was founded
.
Since then, these two parties have been in the global oil bargaining power
.

Now, OPEC+ has decided to cut production sharply, sending a strong signal:

They are parting ways with the West
.

Saudi Arabia is a major member of "OPEC+" and has been the object of
the Biden administration's previous efforts to increase production.

After OPEC+ announced production cuts, an angry U.
S
.
government took aim at Saudi Arabia, saying it would make Saudi Arabia pay.

In fact, as early as half a century ago, Saudi Arabia confronted
the United States on the oil issue.

In 1973, OPEC countries led by Saudi Arabia imposed an oil embargo
on the United States.

At that time, the United States was already dependent on OPEC countries for imports, and the embargo also scared the United States
.

The embargo also means the defeat
of the first round of the United States for oil bargaining power.
In this round of competition, the United States relies on oil companies
.

Wang Zhen, president of the Energy Economics Research Institute of CNOOC, told Tan that in the 30s of the 20th century, the United States controlled most of the world's oil production
.
After World War II, the rapid economic growth of the United States led to a surge in oil consumption, the United States changed from an oil exporter to an oil importer, and the oil bargaining center changed from the Gulf of Mexico to the Persian Gulf, which also increased the dependence
of the United States on Middle East oil.

This dependence has prompted the United States to increase its control
over Middle Eastern oil.
Oil companies became the means of
control.

In the middle of the 20th century, when the oil industry was just beginning, due to the advantages of capital and technology, Western oil companies controlled most of the oil fields
in the Middle East.
Among them, seven companies
play a dominant role.

At the suggestion of the U.
S.
State Department, seven companies formed the famous "Seven Sisters"
of oil.
The "Seven Sisters" control oil prices
by dividing up the market and controlling oil production in the Middle East.

Five of these seven companies were U.
S.
companies, and it is no exaggeration to say that with these companies, the United States controlled the bargaining power
of oil at that time.

At that time, the price of oil extraction in the Middle East was about 10 cents / barrel, and the "Seven Sisters" colluded to set the sales price of oil in the Middle East market at $1.
97 / barrel
.

Wang Zhen told Lord Tan that the price of oil at that time was called the "pump price" and was completely controlled
by multinational oil companies.

And oil-producing countries that have no say in oil bargaining power can only watch their interests being continuously plundered
by Western countries led by the United States.

With the rise of national independence movements after the 50s of the 20th century, these countries decided to unite and confront
the United States.

In 1960, Saudi Arabia, Iran, Iraq, Kuwait and Venezuela decided to establish the Organization of the Petroleum Exporting Countries (OPEC).

In 1960, OPEC held its first meeting

In the face of the combined national sovereignty and interests of OPEC countries, Western capital has lost
.
Oil producing countries are gradually recovering their sovereignty over oil resources and gradually strengthening their influence
on oil bargaining power.

As more and more oil field exploitation rights are transferred from the "seven sisters" back to the hands of oil-producing countries, the balance of oil bargaining power is also quietly changing
.

The Fourth Middle East War became a turning point
.

Dissatisfied with the US military assistance to Israel in this war, OPEC countries led by Saudi Arabia announced an oil embargo
on the United States.

Thanks to the collective action of OPEC members, the price of crude oil rose from less than $3 a barrel to more than $
13.

The embargo has also become a symbol of the transfer of
oil bargaining power from the United States to OPEC countries.

Wang Zhen told Lord Tan that for some time after that, oil prices were dominated
by OPEC countries.

The surge in oil prices has not only sparked strong public discontent
with the government in the United States.
At the same time, the tight supply of oil has also greatly affected the development of
the US domestic economy.

In December 1973, a long queue formed in front of a gas station in New York, USA

This also makes the United States feel the embarrassment of losing its bargaining power for oil
.
But the Americans, how can they give up
.
Not long after the embargo, the then U.
S.
Treasury Secretary arrived in Saudi Arabia
with a plan of cooperation.

And this plan also opened the second round of competition for
oil bargaining power.
In this round of competition, the United States designed two systems
.

The first system of the United States is aimed at Saudi Arabia's weakness.

The complex situation in the Middle East makes security one of
the most important concerns for Saudi Arabia.
The US cooperation plan probably covers these contents:

The U.
S.
government is willing to send troops to protect Saudi Arabia and its oil fields;

The U.
S.
government is willing to sell Saudi Arabia the weapons it needs;

The U.
S.
government will ensure that Saudi Arabia is protected from invasion
by countries such as Israel.

For Saudi Arabia, U.
S.
assurances on security are important
.
As a result, Saudi Arabia has reached this cooperation
with the United States.

But hidden in this cooperation framework is the calculation of the United States to compete for oil bargaining power - in the cooperation plan, Saudi Arabia needs to make two more guarantees:

Guarantee to trade oil only in US dollars;

Pledge to use large petrodollar revenues to buy U.
S.
Treasuries
.

In Saudi Arabia's eyes at the time, this was not a bad thing
.

Zhou Dadi, former director of the Energy Research Institute of the National Development and Reform Commission, told Lord Tan that after World War II, the currencies of many countries have suffered a great impact, so the uncertainty of trading in local currencies is very high, and the US dollar is relatively strong, so it has gradually formed a structure
for international commodity settlement with the US dollar as a general currency.

And Saudi Arabia's willingness to put the dollars it earns back into the United States is also well understood
.

After all, Saudi Arabia's economy is limited in size, and if a large amount of money flows into the country, it is bound to bring severe inflation
.
And using the money to buy the government bonds of the world's largest economy is also a good investment for
Saudi Arabia.

But Saudi Arabia did not expect that this cooperation would also become the beginning of ceding oil bargaining power
.

The dollar is bound to oil, which greatly enhances the status of the dollar in the international monetary system, which also means that the fluctuation of the dollar will also affect the price of
oil.

That is to say, the adjustment of US fiscal policy and monetary policy, after acting on the dollar, will also be transmitted to the price of oil, which is equivalent to the United States controlling part of the oil bargaining power
.

The United States also knows in its heart that this control will not last long
.

This agreement was made possible because in the global industrial division of labor at that time, the needs of Saudi Arabia and the United States were complementary - the United States was one of the few, or even the only countries
at that time, that could meet Saudi Arabia's high-end consumption and investment needs.

When other countries, including Europe and Asia, develop, the products that can be provided to Saudi Arabia and other oil producers are more diversified, which is bound to have an impact
on the "petrodollar".

So, the Americans came up with a second system - crude oil futures
.

In 1983, the New York Mercantile Exchange launched the world's first oil futures contract
.

Wang Zhen told Tan that in the US narrative, futures trading can avoid the situation
of OPEC countries controlling oil prices.

Driven by the United States, in the 80s of the last century, the price of light crude oil futures (WTI) on the New York Mercantile Exchange became the benchmark price
in the crude oil trading market.

The center of oil bargaining gradually shifted
from the Persian Gulf in the Middle East to the New York Mercantile Exchange.

And the United States can get more than this
from these two systems.

The "petrodollar system" forms the petrodollar cycle:

Oil trade is settled in dollars, which requires all countries in the world to reserve dollars; And oil producers will use their income to buy U.
S.
Treasury bonds, which is actually equivalent to the United States can use its own debt to directly exchange it for other people's goods
.

This is a rosy picture
that the dollar system has not been able to achieve before.

The Bretton Woods system established after World War II is essentially an international monetary system
centered on the US dollar.
The system later collapsed
due to the depreciation of the dollar.

The binding of the dollar to oil trading is equivalent to the United States using oil to endorse its own currency, and oil provides strong support for the dollar - after the collapse of the Bretton Woods system, the petrodollar once again provided the basis
for the dollar to dominate the international monetary system.

This is what we often call "dollar hegemony"
.
It is precisely because of such hegemony that the United States can bear a fiscal deficit much higher than other countries without paying any price, because the United States can make up for the deficit
by printing money.

Zhou Dadi told Lord Tan that after the establishment of the "petrodollar system", as soon as the US domestic economy was in difficulty, the United States would issue more currency, and then use these currencies to purchase labor products from other countries around the world, which of course would cause dissatisfaction
in other countries.

These two systems have started the process of
transferring oil bargaining power.
If the United States wants to control oil bargaining power, it needs to do one more thing
.

It was precisely this incident that laid the groundwork
for the third competition for global oil bargaining power.

What the United States has done is to allow more American financial institutions to participate in the trading of
crude oil futures.

When crude oil futures were first launched, the participants were basically industrial oil companies - OPEC countries have a lot of influence on these companies, and the bargaining power of oil is still in the hands
of OPEC countries.

But then, the U.
S.
government began to deregulate finance, encourage financial innovation, and more and more U.
S
.
financial institutions are directly involved in the trading of crude oil futures.

Wang Zhen told Lord Tan that after 2000, the financialization of oil became more and more intense
.
This has also increased the influence of the financial market in oil bargaining power, and oil bargaining power has begun to deviate
from the supply and demand of the oil market itself.

As a result, as the "number one player" in the financial market, the United States can already set the rules of the game for oil bargaining
.

At this time, the news released by Wall Street, the monetary policy of the Federal Reserve, and the turmoil in the US financial market can affect oil prices - compared to the way OPEC countries affect oil prices by increasing or reducing production, the United States undoubtedly has more means
.

With these means, US intervention in oil prices began to become unbridled
.
These interventions are based on the self-interest and geopolitical goals of the United States
.

Under the reality that the "petrodollar system" has been formed, OPEC countries are bound to suffer huge losses
if they do not consider the impact of these instruments in the face of the powerful financial instruments of the United States.
Therefore, OPEC countries must not become a part of this system, and cooperate with the United States to carry out some actions
to increase production and reduce production.

But now, the situation has changed again - OPEC countries are no longer willing to passively cooperate with the United States under the "petrodollar system"
.
This move against U.
S.
rules is a signal
.

Problems, which arise on
dollar credit.

After the escalation of the Russian-Ukrainian conflict, two practices of the United States have made OPEC countries led by Saudi Arabia afraid:

First, the United States froze Russia's overseas dollar assets; The second is that the United States and its allies impose price restrictions
on Russian oil exports.

The United States uses these means in geopolitical games to the extreme
.
These methods may one day be used
by the United States against Saudi Arabia and other countries.

Not long ago, Tan Lord chatted with the world-renowned economist Michael Hudson, and he told Tan Lord that the premise of these countries using dollars or investing in dollar assets is that they must have the right to use these funds
freely.
But now the situation is that the United States has confiscated dollar assets held by countries that the United States considers "adversary", which means that it is not safe
to own dollar assets unless all US requirements are fully met.
Dollar savings are no longer a "safe haven.
"

Clearly, OPEC countries are aware of this
.
OPEC countries represented by Saudi Arabia began to sell US debt, the "petrodollar system", cracks
.

Since oil occupied a place in the world's energy system, the United States has not given up the competition
for oil bargaining power.
After using hot wars, political pressure and other methods, the United States has thought of a once and for all way - to bind the dollar to oil transactions, which also makes the influence of the United States in oil bargaining power become greater
.

The United States is vainly trying to make international rules and objective market laws serve
its interests and geopolitical purposes.
In order to realize such a scheme, the United States has devised various routines and laid various foreshadowings
.

But just like lying, one lie, another lie needs another to round
.
The foreshadowing laid by the United States for the bargaining power of oil has become a gap
in the disintegration of the "petrodollar system".

The counterattack of OPEC countries is the best proof
.

And this is only the beginning
of America's loss.