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Biden’s trip to Saudi Arabia in spotlight as U.S. continues facing higher energy costs

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Yahoo Finance columnist Rick Newman breaks down President Biden's current trip to the Middle East and what many are hoping will be accomplished by his meeting with Saudi officials.

Video Transcript

- Energy price is likely on President Biden's mind, with his trip to Saudi Arabia after a sizzling June CPI report, with the energy index rising 7.5% over the month. Joining us for more on the possible outcomes of this controversial trip and talks on oil is Yahoo Finance's senior columnist Rick Newman. Rick, clearly, the President needs a win here.

RICK NEWMAN: He does. And I think the most important deliverable for Biden would be if he can get some kind of agreement from Saudi Arabia, and perhaps some other Middle East oil producers, to actually produce more oil and get prices down. Now, the trend is actually looking better here than it has been in some time.

We are seeing oil prices come down. Gasoline prices have come down, and wholesale gasoline prices have come down as well, which means we're probably going to see further declines in gasoline prices. But that may not last, because the war between Russia and Ukraine is nowhere near any kind of resolution, and sanctions on Russia and Russian energy are only going to get tougher as time goes on.

So even though we're seeing a bit of a respite in oil and gasoline prices here, there's still plenty of reason for Biden to see whether he can get some agreement from these swing producers in the Middle East to keep pumping through the end of the year and into 2023, and maybe put some more supply on the market.

- Yeah, and this is going to be really delicate to do, right? For a host of different reasons. First of all, Biden has been very vocal about what he sees as Saudi Arabia and Mohammed bin Salman's responsibility himself for the murder of Jamal Khashoggi.

At the same time, Biden has been in Israel has been in talks with the prime minister there-- Yair Lapid-- about Iran, and whether the US rhetoric on Iran is strict enough. He's planning to fly directly from Israel to Saudi Arabia, which is unprecedented. So there are a lot of moving parts here.

RICK NEWMAN: Breaking news-- the Middle East is a tinderbox.

[LAUGHTER]

I mean, in a way, there's nothing new about any of this. I mean, US politics in the Middle East has been fraught for decades. I mean, let's not forget we fought the 1991 Persian Gulf War, the first war-- you might call the Persian Gulf War-- mainly over oil.

We went back to Iraq in 2003. I mean, we've been involved in all kinds of messy business in the Middle East, and we still are. So I mean, this is just a very dangerous part of the world.

You pointed out that Biden is not there just to get more oil on the market. Iran not only threatens Israel on a constant basis, they're also a sworn enemy of Saudi Arabia. And the United States, meanwhile, is trying to get back into that nuclear deal with Iran, which would limit their nuclear weapons program, and remove sanctions on Iran, which would, in turn, bring more oil onto the market.

But that seems stuck. That doesn't seem like it's going anywhere. And to make this even more complicated, there's been a war in Yemen, with the Saudis fighting proxy forces backed by Iran. We won't get into that. It's too complicated.

But there's been some progress in that war as well. And I mean, so Biden has a lot of reasons to be there and try to reassert US influence in the Middle East, which has been waning since Biden called Saudi Arabia a pariah state in 2020 when he was running for President. And of course, President Trump did some things differently in the Middle East as well. So there is a lot of unfinished business in the Middle East, and honestly, there probably always will be.

- So just to put a fine point on it, though, in terms of what is being seen as the main point of business to get done there, if President Biden comes home without that oil agreement that we talked about, is that seen as a big failure?

RICK NEWMAN: A month ago, I would have said, yes, it would be seen as a big failure. But now, we've got oil and gas prices falling. And there actually was an agreement by Saudi Arabia and some other OPEC nations-- all of OPEC, actually-- to increase oil production a bit-- a little bit. That happened a few weeks back.

And that may, behind the scenes, actually have been a condition for Biden going to Saudi Arabia in the first place. So ordinary Americans struggling with gas prices above $4 a gallon-- they are not going to say, oh, I need Joe Biden to come back from Saudi Arabia by-- with a promise that the Saudis will deliver X amount-- X additional bearers of oil, and therefore it's a success or failure.

Ordinary people just want to see gas prices come down. And in that regard, anything Biden can do to get gas prices below $4 a gallon-- I've been saying for a while, for this to help Biden at all, I think people need to see gas prices that start with a 3, not a 4.

And if he can get a little bit more oil out of Saudi Arabia and perhaps the UAE, and get gas prices down below $4 a gallon, that would be a win for him. It's not going to happen the day he comes back, but could it happen by fall? Yeah, that could happen.

- Well, according to GasBuddy, I think in some places, that 3 is already making some tentative appearances. But we'll keep tracking that. Thanks so much. Appreciate it, Rick.

RICK NEWMAN: See you, guys.

- Thanks.