Neoliberals Oppose Market Intervention — Unless the Market Is Screwing US Corporations
In response to OPEC+’s decision to cut oil production to protect profits, the Biden administration is proposing market intervention. But when American oil companies acted similarly earlier this year, the White House was fine with it.
Abdulaziz bin Salman, Saudi Arabia's energy minister, speaks during a news conference following OPEC+'s meeting in Vienna on October 5, 2022. (Akos Stiller / Bloomberg via Getty Images)
On October 5, the Organization of the Petroleum Exporting Countries Plus (OPEC+) announced its decision to cut oil production by an unprecedented two million barrels, skyrocketing forecasted global oil prices in anticipation of yet another disruption to supply chains this year after Russia’s invasion of Ukraine.
The White House immediately condemned the organization’s decision, with National Security Council spokesman John Kirby claiming it was maliciously spearheaded by Saudi Arabia in order to “increase Russian revenues and blunt the effectiveness of sanctions” against the fellow OPEC+ member.
In response to the move, the Biden administration is reportedly considering pushing for a bill called No Oil Producing and Exporting Cartels (NOPEC). The bill would change antitrust laws to revoke the sovereign immunity protecting OPEC+ members, allowing the Justice Department to sue nations that restrain trade in oil, natural gas, or any petroleum product.
From one angle, the OPEC+ nations are acting in accordance with the logic of the free market, prioritizing forecasted profit margins over the unquantifiable and unforeseeable conditions on the ground. This is the logic of the neoliberal economic system that the United States, alongside the World Bank and the International Monetary Fund, has architected and globalized since the 1980s. To be clear, the OPEC+ nations, especially Saudi Arabia and Russia, are not just innocent market actors; they do have political motivations. But the United States has always been able to hide behind that screen of economic objectivity, even as its maneuvers were clearly a bid to maintain its foreign policy interests — so it’s striking to see the US change its tune when other nations do the same.
US officials and billionaire-funded media outlets, think tanks, and economics departments have long regarded the “invisible hand of the free market” as unquestionably the most effective and ethical means of organizing the global economy. But it appears that when market winds blow against the interests of US global hegemony, that neoliberal commitment to the free market goes out the window — and market interventionism is suddenly no longer the exclusive practice of authoritarian Communists.
The US federal government’s desire to implement the NOPEC bill to punish nations pursuing profit at its political expense effectively enables the US state to directly intervene in the global free market. In doing so, it exposes that the American commitment to global neoliberal capitalism was never about the political and social virtues ascribed to it — individuality, merit, innovation, and freedom — but the continued global hegemony of the American state and American business.
Saudi-Russian Collusion or Callous Profit Incentive?
The Saudi Foreign Ministry released a statement on October 13 dismissing the United States’ condemnation as “not based on facts,” insisting that the decision to cut oil production was made in a “purely economic context.” The statement went on to stress the kingdom’s view of its relationship with the United States as a “strategic one,” calling for mutual respect for the sovereign decisions of the kingdom and other member nations of OPEC+.
The Biden administration responded to the Saudis’ claims of economic objectivity, maintaining that US officials presented analysis to the Saudis ahead of the October 5 meeting showing the overall negative financial consequences a potential cut to OPEC+’s production would have on the global economy.
However, energy and security analyst Larry Goldstein of the Center for Strategic and International Studies — a bipartisan think tank hardly inclined to contravene the interests of the American establishment — holds that OPEC+’s economic rationale to cut production is indeed sound, as the Saudis claim. Since June, oil prices have been steadily declining. While OPEC+ forecasted global oil demand to increase threefold throughout 2022, the reality has fallen well short of projections. This is reflected in the United States, where demand only grew by half of what was forecasted for the year. Analysts attribute the reduced global demand for oil to inflation and fears of a looming economic recession, and project that it will continue to decrease.
As a result, the OPEC+ nations found themselves with an unexpected and growing oversupply of stockpiled oil, which was declining in value in the lead up to the October 5 meeting in Vienna. The decision to reduce outputs makes sense as a means of maintaining profits margins.
All political considerations aside, it’s clear that Saudi Arabia and OPEC+ are operating in accordance with the unquestioned profit-motive logic of the global free market. No economic policy decision is made in a political vacuum, of course, but for the US federal government to claim that OPEC+’s decision to cut production was explicitly politically motivated due to its fallout is highly hypocritical.
No entity is more familiar with the convenient use of the free market’s presupposed ethical sanctity than the US federal government. In accusing Saudi Arabia and OPEC+ of masking malicious political collusion behind economic justifications, the Biden administration is projecting America’s own playbook onto them.
Cartels for Thee, Free Enterprise for Me
It is notable that the Biden administration did not similarly condemn oil and gas monopolies, much less make an effort to regulate them, when earlier this year they refused Biden’s request for increased production. These companies cited shortages caused by Russia’s sudden invasion of Ukraine and the need to compensate for minor losses to profit margins during the pandemic years. Biden took their appeal to economic objectivity at face value.
Not content with being catered to, US oil and gas companies then sought to take advantage of public frustration with the Biden administration’s inability to stabilize inflating fuel prices. This saw a period of intense lobbying by the American Petroleum Institute (API), a group representing six hundred oil and gas companies including ExxonMobil, Chevron, and Shell. The API campaigned congressional Republicans to introduce the Restore Onshore Energy Production Act, which would have rolled back Biden’s pause on the leasing of federal lands for private oil and gas extraction. These efforts were particularly malicious given how minuscule Biden’s environmental regulations already are — and yet the domestic oil and gas industries still did not incur the administration’s wrath like OPEC+ has.
Scrambling to find alternative stopgap measures and facing mounting domestic pressure over fuel prices, heightened by the oil and gas industry’s lobbying, Biden announced on March 31 that the federal government would release an unprecedented one million barrels a day from the Strategic Petroleum Reserve (SPR) for the next six months. While unable to push through a repeal of Joe Biden’s minor regulations, the American oil and gas industries were able to offset the costs of meeting inflation to the publicly owned SPR rather than compromise their (already high) profit margins, all without even receiving a slap on the wrist.
Regardless of whether Saudi Arabia’s and OPEC+’s intention was to politically sabotage the US federal government, the Biden administration’s complaints of foul play come across as disingenuous at best when it refused to pass similar antitrust legislation against the American oil and gas industry. Domestic oil and gas companies pointed to the ebbs and flows of the free market to justify their refusal to meet gaps beyond the foresight of financial speculators. So did OPEC+. But only one of them inspired a market interventionist response.
Neoliberal Cannibalization
The fact that the US federal government, the world’s top oil producer, is content with its domestic markets being susceptible to the whims of oil and gas monopolies is the heart of the issue.
The Biden administration’s selective outrage at a “dissident” foreign monopoly in OPEC+ but timid accommodation of domestic ones operating under the same economic logic shows the disingenuousness of the US federal government’s commitment to the free market. The US is happy to intervene in the market — when market dictates don’t align with the particular interests of American multinational corporations, that is.
The federal government’s commitment to the free market has never been about virtue or neoliberal values. Nor has it been a purely Machiavellian pragmatism bent on maintaining the American state’s hegemony as a global military and economic superpower. It’s about a calculated yet nearsighted commitment to preserving the profits of American multinational corporations.
Whether political collusion against US political interests truly informed OPEC+’s decision is likely never to be confirmed. Such is the absolution afforded by the sanctified logic of the free market, which has long been exploited by the United States. Either way, the Biden administration’s hypocrisy — along with the API’s brazen and successful challenge to the administration despite its accommodations — reflects the continuing fall of the US federal government as the main vehicle through which capital exercises its hegemonic influence on global politics and economics.
Neoliberalism started off as a justification to deregulate, ransack, and sabotage other nations’ economies in the name of “efficiency.” Now the chickens have come home to roost: neoliberalism is cannibalizing the architect of its global dominance in the relentless pursuit of profit.