OPEC+ this week slashed crude oil production by a huge amount, even more than expected. The oil cartel cut output by 2 million barrels per day (bpd), starting in November. The expectation was for a cut of between 500,000 and one million bpd.

This tightening of the spigot will make it harder to fight inflation and it’s also a political slap at the West, particularly the Biden administration and the Democratic party, with only a month to go before the November 8 midterm elections.

Of course, the main motivation for the production cut was economic. However, the Saudis have been annoyed with pesky bleeding heart politicians who reproach them about human rights violations. And a key partner of the cartel, Russia, isn’t happy with American and European support of Ukraine. OPEC+ was in a mood to punish the West.

Read This Story: Crude Revenge: Saudi Arabia, Russia Set to Cut Oil Output

How can you make money from this turn of events? The best strategy to benefit from the oil cartel’s reduction of output is to gain exposure to equities or funds that are linked to the energy and aerospace/defense sectors. Below, I‘ll explain why. Some of the reasons my surprise you. I’ll also steer you in the direction of a specific energy investment that’s poised to soar.

The global arms spending bonanza…

Worsening geopolitical tensions, notably the Russia-Ukraine war, are driving a defense spending boom around the world. Another factor provides a bonanza for military sales: rising energy prices. Many investors are unaware of how there’s a direct link between oil revenue and defense spending.

When the coffers of oil producers are full of cash, producers (especially those in the strife-torn Middle East) recycle that money (aka “petrodollars”) into purchases of weapons.

The U.S. provides the biggest percentage of those weapons, which means a sizeable chunk of the money that consumers in our country pay for energy comes back to America, which in turn goes to the shareholders of defense firms. Powerful lobbyists make sure that nothing threatens this cozy arrangement.

How much sheer economic clout does the House of Saud wield? Saudi Aramco had already been the most profitable company in the world, even before going public in late 2019 (see chart).

The relationship between Saudi Arabia and the U.S. isn’t just one of dollars and cents. Saudi Arabia, which is a theocratic monarchy, serves as Uncle Sam’s military proxy in the Middle East, to help serve U.S. national security interests and ensure regional stability. That’s a major reason why America, the world’s supposed beacon of human rights and democracy, often turns a blind eye to Saudi Arabia’s repression.

Through foreign military sales (FMS), the U.S. supports three crucial security assistance organizations in Saudi Arabia: the Ministry of Defense, the National Guard, and the Ministry of Interior. Moreover, since the end of World War II, the U.S. Army Corps of Engineers has played a key role in military and civilian construction in Saudi Arabia.

The U.S. is by far the world’s biggest arms exporter, and Saudi Arabia is by far our biggest customer. The defense budget of Saudi Arabia totaled $45.6 billion in 2022.

Nearly 80% of Saudi Arabia’s defense acquisitions are with the U.S. The Pentagon currently maintains $126.6 billion in active government-to-government sales programs with Saudi Arabia under the FMS system.

And I’m only focusing on Saudi Arabia. The Pentagon regularly sells a massive amount of arms to other OPEC+ nations, including the United Arab Emirates, Kuwait, and Iraq. These weapons include bombers, combat jets, surveillance planes, helicopters, artillery, small arms, ammunition, explosives, electronics…you name it.

So the next time you’re at the gasoline pump and filling your vehicle’s tank, know that with each gallon you buy, you’re also helping countries such as Saudi Arabia, the world’s biggest arms importer, buy more weapons from the U.S., the world’s biggest arms exporter.

If you find this dynamic morally objectionable, write a letter to your member of Congress. Locate a group that lobbies for world peace and donate your time or money.

However, if you want to profit from Wednesday’s decision by OPEC+ to cut oil production, increase your portfolio’s exposure to military and energy stocks. Successful investors dispassionately deal with the world not as they wish it to be, but as they find it.

PS: Speaking of energy investments, our analysts have just unearthed the Mother of All Oil Booms, and the number one stock that’s set to profit from it.

In the coming days, one little-known Texas-based energy company could uncork nearly a billion barrels of oil, and unleash a surge of mega-profits. For all the details, click here now.

John Persinos is the editorial director of Investing Daily.

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