The United States has complained bitterly about the recent OPEC announcement of a cut in oil production, which was seen as providing indirect aid to Russia and as a slap in the face to U.S. President Joe Biden. But U.S. complaints have been met with a sharp backlash from Saudi Arabia as it looks eastward.

Capping the price of Russian oil will mean that unfettered trade in accordance with the law of supply and demand will be undermined. Free markets will be distorted when the “invisible hand” is replaced by anti-market government intervention.

Russia’s deep integration in the global energy market is the result of a long and complex interaction of many actors in the value chain. Therefore, so-called moral clarity will require precise, case-by-case analysis of real-world facts. The outcome remains to be seen.

American policy in the Middle East has Saudi Arabia thinking about selling oil to China in Chinese yuan rather than U.S. dollars. The shift would weaken the dollar’s dominant position in the global oil market.

A permanent reduction in global oil and gas output may come sooner than expected. Fossil energy companies are looking ahead with caution. Instead of investing their profits in exploration or production, they are turning to capital markets.

While reductions will end price wars, major problems remain unresolved on the demand side. Consumption has fallen because of the coronavirus pandemic, and little short of a vaccine will help.

The U.S.-led petrodollar era has eclipsed. It is being surpassed by a multipolar oil age. The current transitional era is permeated by fundamental change, opportunism and speculation.

When achieving a stable global economy supercedes local and political interests, and a sustainable rebound in the global oil prices begins to emerge, this will soothe the chaos in the geopolitical sphere, the price wars among the oil-producing countries, the sluggish investment and consumption in the world economy, the capital market’s negative judgment about the future business growth and the “liquidity trap” in the monetary policy.

Falling oil prices present challenges for the competitiveness of China’s own oil and gas sectors, and while providing short-term benefits for production, poses additional deflationary risks. However, there are opportunities for Beijing to support oil companies in acquisitions, and further its own reserves.

The last months have witnessed oil prices at global markets dropping by more than 50%, the primary reasons being due to Saudi Arabia’s political protectionism over oil prices. Jin Liangxiang contends that beyond purely economic factors, Saudi Arabia actually intends to express its discontent and frustration, especially with Iran.