Saudi-Led OPEC Production Cut Could Be ‘Tipping Point’ for Global Recession, IEA Warns


Saudi Arabia's energy minister speaks during an OPEC press conference

Saudi Arabia’s minister of energy gestures during a press conference in Vienna, Austria on October 5, 2022. (Photo: Vladimir Simicek/AFP via Getty Images).

The International Energy Agency said a jump in oil prices combined with “unrelenting inflationary pressures and interest rate hikes” could spark a worldwide economic downturn.


The International Energy Agency warned Thursday that the Saudi-led OPEC cartel’s decision to slash oil production in the coming weeks could be the final catalyst for a global economic recession as central banks try—and, thus far, fail—to rein in inflation with demand-crushing interest rate hikes.

“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” the IEA said in its monthly report on the state of the global oil market.

“This is MBS’ October surprise. This is his election interference.”

OPEC leaders announced last week that starting in November, members of the alliance will cut their combined oil production by two million barrels per day in an effort to prop up prices, a move that drew furious responses from the Biden administration and Democratic members of Congress.

The IEA said in its new report that OPEC’s “plan to sharply curtail oil supplies to the market has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns.”

The energy agency’s assessment builds on recent warnings from other prominent global institutions—including the International Monetary Fund and the World Bank—that a painful global recession could be right around the corner thanks to a confluence of factors, including Russia’s war on Ukraine, stubbornly high inflation, ongoing supply chain snags from the pandemic, financial instability, and relentless corporate profiteering.

New Consumer Price Index figures released Thursday show that U.S. inflation rose in September, heightening concerns that the Federal Reserve could push the country into recession with additional large rate hikes—the impacts of which reverberate worldwide, particularly in poor nations.

OPEC’s decision to slash oil output piles on yet another recessionary risk factor, according to the IEA, as it’s likely to drive worldwide gas prices back up after their recent downtrend.

Facing massive backlash from U.S. lawmakers and the Biden White House over OPEC’s planned production cut, Saudi Arabia’s foreign ministry suggested in a statement Thursday that the Biden administration privately urged OPEC to postpone its supply reduction announcement by one month, a delay that would have pushed the decision off until after the U.S. midterm elections.

In response, White House National Security Council spokesperson John Kirby accused the Saudis of trying to “deflect” and said the U.S. presented the kingdom with an analysis showing that “there was no market basis to cut production targets, and that they could easily wait until the next OPEC meeting to see how things developed.”

“Other OPEC nations communicated to us privately that they also disagreed with the Saudi decision, but felt coerced to support Saudi’s direction,” Kirby added. “We are reevaluating our relationship with Saudi Arabia in light of these actions.”

Analysts have argued that OPEC’s move was clearly politically motivated.

“This is MBS’ October surprise,” Trita Parsi, executive vice president of the Quincy Institute for Responsible Statecraft, told The Intercept, referring to Saudi Crown Prince Mohammed bin Salman. “This is his election interference.”

“It forces Biden to make a choice,” Parsi added. “Will he protect America’s democracy and Democratic lawmakers in Congress, or will he triple down on a flawed gamble that says that the U.S. has no choice but to acquiesce to Saudi Arabia to prevent Riyadh from aligning with Russia?”

This story has been updated with comments from White House National Security Council spokesperson John Kirby.

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