WASHINGTON (Pakistan Point News / Sputnik - 04th November, 2022) The United States gave Saudi Arabia and the Russians control over the price of oil in the global market when it reduced domestic energy production, former Lehman Brothers executive Lawrence McDonald told Sputnik.
In early October, OPEC+ unanimously agreed to decrease oil production by 2 million barrels per day starting in November in response to uncertainty in global energy markets, ignoring the United States request to delay cuts.
"The US has handed more control over the price to the Saudis and the Russians," McDonald said. "(The United States) We've taken hundreds and hundreds of rigs offline and we've given more production power and control over the price to the Saudis and Russians. Not a very smart thing."
McDonald served as the vice president of distressed debt and convertible securities trading at Lehman Brothers, which collapsed during the financial crisis in 2008.
The Saudis are bold to push back against the United States and it's a bold move, but OPEC+ countries have their own economic models and reasons to cut production, including concerns about further coronavirus-related lockdowns in China that will decrease demand, McDonald said.
"The global economy is crashing," McDonald said.
The United States sustained a self-inflicted wound when it decreased domestic oil production between 2019 to 2021, from a peak of 13 million barrels a day to a low 10 million barrels a day, McDonald said.
"I want to be clear, that's coming back, US production is coming back, but bottom line is that when you cut production that much, you hand more control over the price to the Saudis and Russians," McDonald said.
US oil production has been increasing throughout 2022, but has only reached a high of about 11.9 million barrels per day in August, according to the US Energy Information Administration.
"We should be pumping 16 million barrels a day today," McDonald said. "If we were pumping 16 million barrels a day, the Saudis and the Russians would not have, they wouldn't have the ability to cut production the way they are because the US would steal more market share."
Since 2021, energy prices have been surging worldwide as the global economy rebooted after the pandemic. The growth increased after the European Union and other Western states imposed sanctions on Russian oil and gas, disrupting supply chains amid surging demand. A price cap on Russian seaborne oil, suggested by the G7 and expected to be implemented in December, and the decision by OPEC+ to curb production also strained the already tense global energy situation.
McDonald is co-author with Patrick Robinson of "A Colossal Failure of Common Sense," which is about the fall of Lehman Brothers and the 2008 financial crisis.
