It’s a hot button item. Always. Any discussion of President Trump raises the blood pressure of both liberals who hate him and conservatives who love him (or hate him). Even when facts are presented either in favor of, or in lambasting his policies, facts seem to mean little unless a bank account is involved, and the oil sector’s and the common commuter’s bank accounts are most certainly involved in the President’s seemingly schizophrenic approach to the oil industry.
It is clear he has sought to alleviate regulatory roadblocks and pressed for the support of U.S. strides toward becoming the globe’s number one oil producer. This is not only a tremendous economic win but a political one as well. From bolstering his base to giving the U.S. much needed leverage against OPEC and other oil producing nations that once could hold oil production and prices hostage over unrelated international disputes, Trump’s work in promoting the oil industry has indeed paid dividends.
Yet at the same time, he has often exercised his power over now close ally Saudi Arabia to pressure the Kingdom to keep OPEC in check, for the sole purpose of depressing global oil prices. Trump tweeted a warning back in late March that OPEC needed to increase production to keep prices down which resulted in a market drop of 3% that same day.
He flexed this power again just last week in claiming “he called OPEC and told the producer group to bring fuel prices down” according to a report by CNBC. In return for the Saudi’s assistance, Trump has kept the hammer down on their chief regional rival, Iran. Trump’s tweet to depress oil prices last week also served as a hammer blow to global oil prices as they shed over $2 a barrel after a healthy 30 day climb.
OPEC is wary though of Trump’s demands as the last time he called for a production ramp up he’d promised the Saudi’s that Iran’s grey market production would be halted with increasing sanctions. They felt burned when Trump granted some nations waivers to continue buying Iranian oil in late 2018. Though those waivers have ended, Saudi Arabia seems reluctant to listen to Trump’s call for price controls. Regardless, when he tweets such things, prices take a hit, as do U.S. producer’s bottom lines.
Trump seems to want the best of both worlds: the support of the oil industry and the support of his base who clearly want low gas prices going into the Summer of 2019. But is it a schizophrenic-like policy, or is he simply playing both ends of the field for political reasons?
Though his paradoxical stance seems like it would cause consternation to the oil majors, thus far, it has not, and certainly it seems his base is unmoved by the increase in gas prices which are up 11% since January of 2018 and a total of 17% since he took office. Oil prices are up 8% over the last 16 months and 30% since he took office.
The question is whether Trump can continue to thread this needle in keeping both happy, for at some point, oil prices and the cost of a gallon of gas will make one or the other very unhappy.