Trump calls out OPEC for ‘artificially high’ prices
AS DOMESTIC petrol prices surged to their highest level in three years, President Donald Trump railed against the OPEC oil cartel on Friday, declaring that the group was unjustifiably manipulating supplies for selfish gain.
“Looks like OPEC is at it again,” Trump wrote on Twitter. “Oil prices are artificially Very High! No good and will not be accepted!”
The Organization of the Petroleum Exporting Countries makes an easy scapegoat for American politicians. It has been a target of derision by US leaders since the Arab oil embargo of 1973 caused long lines at the pump and badly damaged the economy.
But OPEC doesn’t have the same influence it once did, given soaring production in the United States, Canada and a few other countries. Now it is just one factor in lifting prices, which are being affected by everything from geopolitics to the growing demand for petrol and diesel fuel.
Trump could have been referring to OPEC’s cutback in exports to increase prices. Saudi Arabia and other oil producers in the region have also made an alliance of convenience with Russia, a non-OPEC member heavily dependent on oil revenues to finance its government. Together they have restrained production since 2016, reducing global stockpiles.
“Prices are high,” said Rob West, an analyst at Redburn, a London research firm. Noting that Trump may have a point, he added, “I do see some artificiality in the prices we see today.”
OPEC and non-OPEC producers gathered on Friday in the Jeddah in an effort to continue the policy even as the price of Brent crude, the global benchmark, has climbed above $70.
Not long ago, as prices plummeted from more than $100 a barrel in 2014 to below $30 in early 2016, inventories were so high that tankers were needed to hold excess supplies. Now, even as US oil production continues to grow, worldwide inventories are declining, increasing the pressure on prices. The International Energy Agency reported that global oil supply eased by 120,000 barrels a day in March.
The price of crude is the major reason US drivers are paying more at the pump as the summer driving season approaches. The average price for a gallon of petrol on Friday was $2.75, according to AAA, up 19 cents over the last month and 33 cents from a year ago.
The increase has been particularly noticeable over the past week, with prices in some states rising more than a penny a gallon every day.
Trump’s comments may have been informed by his new top economic adviser, Larry Kudlow, who has long viewed low petrol prices as a beneficial stimulus. In a 2014 commentary for CNBC. com, he argued that lower oil prices would produce savings for households and businesses, freeing up money for consumers to spend. “All these factors will increase US economic growth, not reduce it,” he wrote.
Deutsche Bank analysts warned last week that the rise in petrol prices was beginning to cut into the disposable-income gains from the tax cuts Trump signed into law late last year.
Much of the recent price increase is a result of world tensions – some related to Trump’s policies – that have bolstered investor expectations that oil prices could rise even higher.
Oil production is plummeting in Venezuela, the country with the largest reserves, and the expectation of stepped-up US sanctions in the coming months could reduce its exports further. The threat that the United States could pull out of the nuclear deal with Iran has put the size of future Iranian exports in doubt.
A doubling of US oil production in recent years, producing growing exports and a decline in imports, has helped stabilise the oil market and kept big price rises in check. But US output represents only a bit more than 10 percent of the 98 million barrels a day produced worldwide, and there are limits to its growth.