Even missile sops not enough to meet world's oil shortfall

The US government has shipped a large number of Patriot missiles to Saudi Arabia over the past month in exchange for increased oil production to meet the shortfall caused by US sanctions on Russia, the Wall Street Journal has reported.

Saudi Aramco, a state-owned oil company, recently announced that it will invest $40 billion to $50 billion this year to meet the growing demand for oil. The statements seem to suggest the US plan to swap Patriot missiles for increased Saudi oil production is working. However, it may not be that simple.

"Saudi Arabia will not be held responsible for any oil shortages in the international energy market," the Saudi foreign ministry said in a statement on Monday, amid continuing attacks on Saudi oil facilities by Houthi militants in Yemen. The statement almost delinks Aramco's production enhancement plan from the US' Patriot missiles supply.

The Saudi foreign ministry's statement also indicates that the mere supply of Patriot missiles will not be enough to improve relations between Saudi Arabia and the US, which have deteriorated sharply in recent years, particularly after a US investigation pointed a finger at the Saudi royal family for the killing of Saudi journalist Jamal Khashoggi inside the Saudi consulate in Istanbul in 2018.

The Joe Biden administration's removal of the Houthis in Yemen, who have close ties with Iran, from the list of terrorist groups in order to restart nuclear talks with Iran, has soured ties further. Saudi Arabia's move to develop closer ties with Syria since June has also encountered strong opposition from the US.

Even if the US persuades Saudi Arabia and the United Arab Emirates to meet the oil supply gap, they will have a tough time doing so. Russia's oil production capacity is 7 million barrels a day, and the International Energy Agency predicts that tough US-led sanctions will cut Russian oil production by 3 million barrels a day. If this shortfall cannot be met by winter, the European Union will plunge into a serious energy crisis.

To meet this gap other major oil producers will have to increase oil production to full capacity. However, large increases in production will bring down prices, preventing oil-producing countries from reaping the excess profits from high oil prices. The US might then be forced to ease oil sanctions on Iran.