Could US President Joe Biden’s visit to Saudi Arabia have a positive impact on oil prices?

During the visit, President Biden will also meet with Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdulaziz, who is also the kingdom’s Deputy Prime Minister, to discuss areas of bilateral cooperation as well as joint efforts to address regional and global challenges.

The US President’s visit might heal frayed US ties with the kingdom, but it’s unlikely to resolve the energy crisis plaguing the global economy, Bloomberg reported.

“The thing is, there isn’t much more oil in Saudi Arabia and the UAE to really significantly change the market,” Daniel Yergin, a renowned oil historian and vice chairman at S&P Global Inc, told Bloomberg. “The supply situation is so razor thin.”

Saudi Arabia and the UAE – effectively the only two producers with significant spare capacity – hold just under 3 million barrels a day of idle output between them, according to the International Energy Agency in Paris. That’s about 3 percent of demand.

They would need to deploy all of that – pumping on a sustained basis at levels rarely if ever seen before – to offset the losses the IEA expects Russia to suffer in coming months as international sanctions take effect, Bloomberg reported.

And even if they do ramp up, exhausting their spare supplies would only sow fears that no buffer remains to cover future supply emergencies – like a fresh crisis that escalated in Libya this week.

“That’s the last security blanket that exists for the oil market right now,” said Yergin.

Biden’s visit is planned amidst this market havoc and rampant inflation unleashed by Russia’s war in Ukraine.

In a symbol of goodwill, Riyadh and the OPEC alliance of oil producers it leads agreed earlier this month to pump a little extra crude to ease out soaring prices.

But even if the visit secures a promise of additional barrels, it may fail to cool a rally that has propelled US gasoline to unprecedented levels of $5 a gallon and underpinned the inflationary spiral, Bloomberg reported.

Refining Bottleneck

In any case, additional supplies of crude oil may do nothing to address what is arguably a more pressing problem: a shortage of oil refining capacity to make gasoline, diesel, and jet fuel.

Years of plant closures have created a bottleneck that’s now doling out bumper profits to refiners, while similarly squeezing motorists and other fuel consumers.

Natural gas prices have also soared because of concern Russian supply could be lost following the invasion of Ukraine, boosting wider energy costs.

“Energy price inflation is a bigger problem than crude oil – it’s beyond Saudi Arabia and its Gulf counterparts to fix,” Bill Farren-Price, a director at Enverus Intelligence Research told Bloomberg.

The absence of a solution from the Middle East means that fuel costs themselves may remain high until the financial pain forces consumers to drive, fly, and purchase less, according to UBS Group AG.