Gas sure is expensive these days.
It hit an all-time high of $4.17 a gallon this week, and that was before President Joe Biden took the once-unthinkable step of banning Russian oil imports on Tuesday.
To give you an idea of how wild that is, Biden and his allies in Western Europe had chosen in late February to sanction just about everything except for Russian oil, even after Vladimir Putin ordered a full-scale invasion of Ukraine. It took more than a week of fighting, and Putin rattling a nuclear saber, before Biden took this step.
The surges in oil prices so far have only been a result of the threat of an oil ban, but now that the U.S. has actually done it, prices could rise even more. Before the sanctions, Russian oil accounted for 8% of the global supply, and 3% of U.S. imports. Although those numbers seem small, they have already led to record-high gas prices in the U.S., which could potentially surpass an average of $5 per gallon in the near future. And for Biden, a turbulent oil market is a political nightmare.
Keeping gas prices low is a major priority for Biden and the Democrats, especially ahead of the pivotal midterm elections in November. To try and do that, he’s reaching out to old adversaries—Venezuela and Saudi Arabia—to plug the U.S. oil gap, rewriting the last few years of international relations in the process. And his scramble to stabilize oil prices is bringing him closer to countries he once hoped to avoid.
“I am sure the Biden administration is looking at every option to try to ease some of the pressure on the market,” Victor McFarland, history professor at the University of Missouri and an expert in Middle East energy politics and Saudi Arabia, told Fortune. “They just don’t have any good options for replacing Russian oil.”
A U.S. delegation reportedly visited Caracas, Venezuela, over the weekend to meet with top government officials and iron out a deal to bring more Venezuelan crude oil to market.
It was the highest-level visit by U.S. government officials to Venezuela in years. The U.S. severed all diplomatic relations with Venezuela in 2019 after accusing President Nicolás Maduro of stealing an election, closing down the American embassy in the country, and imposing severe sanctions. That led to Venezuela defaulting spectacularly on its foreign debt in 2019.
But the animosity between the U.S. and Venezuela goes back longer than that. Former President Barack Obama placed sanctions on Venezuelan officials in 2015 after declaring the country a national security threat. Tensions ramped up considerably during the Trump administration, after further sanctions and a reported coup attempt supported by an amphibious assault squad that the U.S. denies had any link to the CIA.
“It’s a new world,” Eric Farnsworth, vice president of the Council of the Americas/Americas Society, a research forum focusing on economic and social development, told Fortune. “To send senior officials to Caracas to try to get more oil from a leader who is sanctioned and under indictment shows a real sense that increasing oil supply is of huge interest right now to the U.S.”
It’s especially noteworthy considering that the White House publicly criticized Venezuela just days ago for its “erosion of human rights guarantees.” But the visit already seems to have softened relations between the two countries, as Venezuela released two jailed American citizens on Tuesday as an apparent sign of goodwill towards the U.S.
Biden is also reportedly mulling over a spring visit to Saudi Arabia to discuss increasing oil production, according to Axios, despite his 2019 campaign trail promise to “make them [Saudi Arabia] pay the price, and make them, in fact, the pariah that they are.” He was referring to the Kingdom’s string of human rights abuses, including the murder of journalist Jamal Khashoggi, a plot U.S. intelligence sources confirmed involved Saudi Arabia’s Crown Prince Muhammad bin Salman.
Biden has attempted contacting the Saudi royalty since energy prices began surging to discuss increasing oil output, but the Crown Prince is reportedly screening the president’s phone calls, according to the Wall Street Journal.
“There was some expectation of a phone call, but it didn’t happen,” a U.S. official knowledgeable about the outreach efforts told the Journal. “It was part of turning on the spigot [of Saudi oil].”
“Crisis makes change”
Experts think that it is unlikely Biden would have wanted to engage with regimes under normal circumstances that he has publicly admonished in the past, but note that these are desperate times.
“Crisis makes change. When we have an economic and energy crisis on this scale, you have to make compromises and changes that you wouldn’t otherwise,” Ben Cahill, senior fellow in the energy security and climate change program at the Center for Strategic and International Studies, a think tank focused on international political, economic, and security issues, told Fortune.
However, it is unlikely that any one country will be able to make up the gaping hole in the global oil supply left behind by Russian energy imports.
The global oil market has been wild for weeks now. The Ukraine invasion has already sent oil prices soaring to well above $100 per barrel, while predictions on where prices could go from here range anywhere from $150 to $200.
However, Farnsworth said that he is skeptical that Venezuela would be able to make up for Russia’s contribution to the global oil supply, citing the deficiencies of Venezuela’s oil infrastructure after years of economic hardship and U.S. sanctions.
“In order to get the Venezuelan industry to where it would have a meaningful contribution to global oil supply in a way that would affect U.S. gas prices, that’s years down the road and multiple billions of dollars of investment, which I don’t predict would ever happen,” Farnsworth said.
For different reasons, it’s also unlikely that Saudi Arabia will increase its production any time soon.
“They [Saudi Arabia] have been very cautious about expanding production. I think a big reason for that is that they remember the really brutal price collapse of early 2020 because of the pandemic, and so they don’t want to risk expanding production too quickly,” McFarland said.
So if Biden is reaching out to regimes that he has criticized in the past for human rights abuses, but these oil producers are either unwilling or unable to ramp up oil production, then why is he doing it?
Other uses for international alliances
Some experts think that there’s more to Biden’s overtures towards Venezuela and Saudi Arabia than just increasing the global supply of oil.
Natasha Hall, a senior fellow specializing in Middle East Policy at the Center for Strategic and International Studies, said she believes that building relationships with those countries can benefit Biden if it means that they will not fall under China and Russia’s sphere of influence.
“If the United States is strengthening these relationships in the Gulf states, that will alleviate concerns that [U.S. allies] Japan and South Korea and others in East Asia have had about China monopolizing those relationships in the future,” she said.
Venezuelan President Nicolás Maduro is a long-time ally of Putin. Saudi Arabia also has deep ties with Russia, as the top two oil-producing countries in OPEC. It would be in Biden’s interest to erode those relationships as tensions between Russia and the West grow.
Hall also said she believes that stronger relations with these countries might also make it easier to keep tabs on social injustices.
“If you do have a closer relationship to these regimes, then maybe it gives you more leverage to push on human rights,” she said.
Other experts said they believe that Biden’s move to engage with other oil producers around the world is primarily to improve optics ahead of next November’s primary elections, as inflation and high energy prices are causing the Democrats to take a big hit.
“It’s pretty good politics to show the American public that the administration is pushing on all fronts,” Farnsworth said, adding that a better option would be for Biden to publicly turn to more friendly nations to ask for increased oil output, such as Canada and Mexico.
“[Canada and Mexico] are all oil-producing countries and not under sanctions. They’re democratic countries. They could produce more in a shorter time than it would take for a country like Venezuela,” he said.
As of Wednesday, there is no indication that Biden has reached out to either country, although Canadian government officials have publicly said that they would be open to revisiting plans for the Keystone XL, a highly controversial pipeline linking the U.S. to Canada’s oil sands which Biden canceled last summer out of environmental and social concerns.
Aside from international plays, Cahill said Biden’s main focus should be building energy security and reducing dependence on any foreign countries by ramping up domestic production of oil while investing in clean energy.
However, it’s likely that the Western world will be saddled with elevated gas prices for a while, and Biden may need to knock on multiple doors at the same time to keep prices as low as possible and his party’s political prospects alive.
If that means making some compromises on human rights abuses and ideological differences along the way, it appears to be something the administration is prepared to do.
“It’s a difficult ballgame to be righteous in the face of such energy insecurity,” Hall said.
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