Trump learned from Biden’s mistakes: Never underestimate Saudi Arabia

When it comes to energy, President Trump is playing chess, not checkers. Former President Joe Biden wasn’t even playing tic-tac-toe.

Consider: Why are U.S. officials traveling to Saudi Arabia to negotiate peace between Ukraine and Russia? Why not more traditional diplomatic venues like Geneva or Vienna?

Because Trump knows that Saudi Arabia is critical to lowering oil prices and pressuring Russia to come to the bargaining table. He also knows that Mohammed bin Salman, the Saudi crown prince, craves acceptance as a global leader and that hosting these high-level meetings helps him achieve that end.

Biden had spurned bin Salman, promising in 2019 to make him "a pariah." Trump won’t be making that mistake.

Gasoline prices are down 11 percent from a year ago, providing welcome relief to Americans worried about inflation and a boost for the Trump White House. Trump campaigned on lowering energy prices; nothing could be more important to the success of this administration. Biden’s approval ratings were clobbered when gasoline prices breached $5 per gallon in 2022; for Trump, the stakes are equally high.

Gasoline prices are lower because crude oil is hovering around $67 per barrel, down from $84 a year ago. Why the drop? There are numerous factors, but the most important is that OPEC+, for the first time since 2022, has agreed to expand output in April. Between next month and September 2026, OPEC-plus has agreed to reverse its prior 2.2 million barrel per day cuts; unless demand strengthens unexpectedly, or there is a major disruption of production in the Middle East, the bump in output should keep prices steady, and below the $78 level posted on Inauguration Day.

For that, you can thank Trump and his outreach to bin Salman.

Saudi Arabia remains the world’s “swing producer” of oil and the leader of OPEC, and the crown prince guides its policies. He is behind the oil cartel’s decision to raise output. Bin Salman anticipates that Trump will tighten sanctions on Iran, which will reduce global supplies; OPEC is delighted to step up.

Soon after taking office, Trump spoke virtually to the global corporate and political leaders at the World Economic Forum at Davos, saying: “I’m also going to ask Saudi Arabia and OPEC to bring down the cost of oil. You got to bring it down, which, frankly, I’m surprised they didn’t do before the election. ... They’re very responsible, actually, to a certain extent, for what’s taking place — millions of lives are being lost."

Trump was correct; OPEC-manipulated high prices have enabled Vladimir Putin’s war effort. Though Russian oil production fell last year, revenues rose 2 percent. OPEC boosting output could lower prices and bring peace closer. Trump’s speech knocked oil prices down about 1 percent; soon after, OPEC announced a production hike beginning in April.

Longer term, Trump will work to expand U.S. oil output. That will not happen overnight, especially since some of the most promising new sources of oil lie in areas like Alaska, which could take years to come onstream.

Lower oil prices will not encourage oil companies to “Drill, baby, drill!” but the White House can boost oilfield investment by reversing Biden policies that hiked royalties required on federal lands, imposed stiff fees on methane leaks, and withheld drilling permits and lease sales. The industry will respond to such incentives.

Still, Saudi Arabia and Trump’s relationship with bin Salman remain key.

Biden went out of his way to insult the Saudi leader, punishing him for allegedly masterminding the murder of journalist Jamal Khashoggi. The president also refused to speak to MBS, saying he would only communicate with his aging father. Of more consequence was Biden's decision to rescind the terror designation that Trump had slapped on the Houthis and to cut off sales of offensive weapons to the Saudis, both of which complicated their war against the terror group in Yemen.

Biden’s hostility toward Saudi Arabia encouraged its leader to advocate for lower oil production and higher prices, which in turn hurt Biden’s standing and the U.S. Pummeled by high inflation and anxious about looming midterm elections, Biden traveled to Saudi Arabia in 2022 to beg for higher oil production. Rather than shake bin Salman's, Biden insisted on a “fist bump” — a mortifying diplomatic episode. The Saudi prince was unmoved, and oil prices stayed high.

The result was that Biden drained the Strategic Petroleum Reserve, reducing the amount in storage to its lowest level since 1984.

Trump will push the Saudis to keep prices low; he also needs their help to resolve the conflict in Gaza. Recent U.S. attacks on the Houthis, Iran proxies and enemies of Saudi Arabia, are part of the complex negotiations.

Trump will continue to play chess, not checkers.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim and Company.

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