Trump presses Saudis to increase oil production
BRIDGEWATER, N.J. >> President Donald Trump said Saturday that he has asked Saudi King Salman to increase oil production to help ease pressure on rising gasoline prices, which have threatened to stifle economics benefits for Americans from the Republican tax cut.
In a morning tweet from his private golf club in Bedminster, New Jersey, Trump said he made the request during a conversation with Salman, citing the “turmoil” and dysfunction in Venezuela and Iran for driving up prices at the pump.
The average per-gallon price for gasoline in the U.S. was $2.85, a jump of 63 cents from a year ago, according to the AAA. Prices over the past two months have been higher than any time since late 2014, according to the Energy Information Administration.
Trump’s tweet caps an unsettling week for oil prices. Just a week ago, the Organization of the Petroleum Exporting Countries reached an agreement to gradually increase output by about 700,000 barrels a day to stabilize oil prices and offset lost production in Venezuela, where political and oil patch upheaval has led to a drop of exports. The cartel, which had curtailed production in 2016, also said it would boost output more later in the year to offset limits on Iranian oil sales resulting from the reimposition of U.S. sanctions on Iran.
But OPEC’s promises did not settle the markets, and crude oil futures have spiked since the meeting. Gasoline prices at the pump also are expected to rise as more Americans take to the roads in the middle of the peak summer driving season.
That has led Democrats to lay the blame on the White House, highlighting Trump’s decision to pull the United States out of the Iran nuclear deal as a factor in the tightening global oil supply.
“President Trump’s reckless decision to pull out of the Iran deal has led to higher oil prices,” Senate Minority Leader Charles Schumer, D-N.Y., said last month during a photo op outside an Exxon station. “These higher oil prices are translating directly to soaring gas prices, something we know hurts middle- and lower-income people.”
The impact of rising gas prices in offsetting the pocketbook benefits of the tax cuts approved by Congress in December could dampen public enthusiasm over the economy ahead of the midterm elections. Trump should know about the potential political consequences, having routinely blamed Barack Obama when prices rose during that administration.
Trump said he asked the Saudi king to crank up production by as much as 2 million barrels a day, which would bring Saudi Arabia’s production close to its maximum capacity.
But oil experts were cautious about whether that would actually reduce international prices or raise anxiety further.
“If the Saudis were really to raise output by 2 million barrels a day, their maximum capacity according to the International Energy Agency, that may backfire from an oil price standpoint by leaving the oil market with no meaningful spare capacity to handle any possible future supply problems, from geopolitics in places like Iran or Libya to hurricane season to any other issues,” said Jason Bordoff, director of the center for global energy at Columbia University.
The overt pressure brought by Trump on Saudi Arabia is unusual, but the kingdom has been actively urging the president to withdraw from the international agreement that placed restrictions on Iran’s nuclear program. When Trump withdrew and reimposed sanctions, that meant Iranian exports would come under pressure.
Saudi Arabia is the world’s largest exporter of crude oil, exporting 7 million barrels a day.
“This is not just about turning the spigot a little further. This would be extraordinary,” said Robert McNally, president of the consulting firm Rapidian Energy Group. McNally, who served on President George W. Bush’s National Security Council, said, “It reminds me of when the Federal Reserve undertakes an emergency injection of liquidity gets people worried. This is like that. The president is asking the central bank of oil to make a massive injection of liquidity into the market.”
Saudi Arabia’s official government press agency gave a more ambiguous description of the king’s discussion with Trump. It did not give a figure for expanding production.
“The two leaders stressed the need to make efforts to maintain the stability of oil markets, the growth of the global economy, and the efforts of producing countries to compensate for any potential shortage of supplies,” Riyadh said in a statement.