Saudi Arabia and Russia’s crude, inflationary alliance

Higher oil prices are the last thing we need. [Bloomberg]( This is the Weekend Edition of Bloomberg Opinion Today, a roundup of the most popular stories Bloomberg Opinion publishes each week based on web readership. New subscribers can [sign up here](. [The ‘Peak Oil’ Sequel Comes With a New Twist]( — John Authers Playing the game. Photographer: Amilcar Orfali/Getty Images South America The main shifts in the oil price over the last decade have all been driven by geopolitics, and not by the forces of supply and demand in international financial markets. In 2014, the discipline of the OPEC cartel broke down in what was widely perceived as an attempt to punish shale operators by bringing crude to a level that they couldn’t operate profitably; in 2020, another breakdown reflected Saudi Arabia falling out with Russia; and the invasion of Ukraine evidently triggered the spike early last year. The [latest rally]( also owes much to geopolitics — this time, the alliance between Saudi Arabia and Russia that veteran oil analyst Jean Ergas of Tigress Financial Partners calls a “Pact of Steel.” The reference to the prewar alliance between Hitler and Stalin is provocative, but this new arrangement is having a galvanizing effect. The US responded to last year’s price spike by drawing on its strategic petroleum reserve, which had been built up for just such a moment. This stopped Russia from holding the western world to ransom over the oil price. But having done so once, the US cannot drain its reserve again. America’s oil inventories are far lower now, thanks to the depletion: For an insight into the game that Saudi Arabia is playing, I recommend [this episode of the These Times podcast](, in which the Cambridge academic Helen Thompson asks how worried we should be about this current behavior. In conjunction with the money the kingdom is splashing on sports, from setting up a rival to the PGA golf tour to paying silly money to bring Neymar and Ronaldo to the Saudi league, it’s taking a newly aggressive role in the world. To quote Ergas, the strategy “is about telling the US that we can live without you.” With its new markets to the east and its alliance with Russia, Saudi Arabia has put a floor of about $70 under the oil price. Read the [whole thing](. And if you’re interested in getting John’s newsletter delivered directly to your inbox, sign up [here](! Bonus Energy Reading: - [BP’s Revolving CEO Door Is Beyond the Pale]( — Javier Blas - [China May Get Caught in an Oil-Price Crossfire]( — David Fickling - [What Happens When Renewable Energy Isn’t So Cheap?]( — Matthew Yglesias - [For Saudi Arabia, $100-a-Barrel Oil Is Already Here]( — Javier Blas Popular Stories from Bloomberg Opinion: - [The US and China Are Waging a Cold War That Is Truly MAD]( — Niall Ferguson - [Putin-Kim Bromance Is China’s Problem Too]( — Bloomberg’s editorial board - [Apple’s Lightning Cable Devotion Lasted Far Too Long]( — Dave Lee - [Putin Is Gathering the Enemies of the West]( — Marc Champion - [A Huge Lithium Discovery That Economists Were Expecting]( — Tyler Cowen - [Fed’s ‘Last Mile’ of Inflation Fight Will Be No Cakewalk]( — Mohamed A. El-Erian - [The Complex Legacy of ‘Lost in Translation,’ 20 Years On]( — Gearoid Reidy - [We’re Headed for a Government Shutdown]( — Jonathan Bernstein - [China’s Military Spending Is Much Bigger Than We Thought]( — James Stavridis - [Republican Impeachment Inquiry Marks Low Point in History]( — Noah Feldman More From Bloomberg Opinion Here’s what we’ve been listening to this week. - [Crash Course: Will Elon and Zuck Ever Grow Up?]( with Timothy L. O’Brien and Kara Swisher - [Bloomberg Opinion]([: Hurricanes, Housing and Tipping]( with David Fickling, Jonathan Levin, Lisa Jarvis and Bobby Ghosh - [X Broadcast: Breaking Down the Latest Inflation Report]( with Jonathan Levin, Allison Schrager and Karl Smith Follow Us You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](