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This comes as a group of energy market analysts maintain that despite the stances he is assuming, Trump is pragmatically pursuing rise in global oil prices.
Trump has repeatedly lashed out at what he calls high oil prices putting the blame for current crude prices on producing states. Trump maintains that OPEC’s decision has unreasonably pushed the global price of the strategic product up.
In a number of his Twitter messages, Trump has described OPEC as a ‘monopolizing cartel’ that by manipulating global energy market, keeps oil prices up. In his last Twitter post addressing the organization, Trump called on OPEC to increase oil supply to international markets and bring prices down.
This comes as a number of observers hold that US president’s moves and measures as well as his political and economic approach are among the reasons for the increase in oil prices. A few months ago, one of Trump’s Twitter posts against OPEC, caused a more than 25-percent increase in global oil prices.
A few days ago, and again in a Twitter post, Trump called OPEC a ‘monopolizing agency’ and wrote: “The OPEC monopoly must remember that gas prices are up and they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $ ’s. This must be a two way street. REDUCE PRICING NOW!”
Many experts believe that Trump’s non-expert remarks, his political interferences and his oil tweets in the past few months have driven crude prices up by at least $ 10 per barrel. Analyzing Trump’s stances, observers list a number of diverse domestic and international reasons and objectives.
1. Individuals with sufficient knowledge and information about the US and its internal issues stress that Trump’s threats against and interference in global oil market are due to the US congressional elections, to be held in November, looming and the strong impact of fuel and energy price issue on US people’s decision.
A number of analysts also forecast that Republicans will be doomed to an abject failure in the coming election. They also say that Trump’s immature approaches and policies will create fiasco for his fellow partisans in the upcoming election more likely.
2. Trump, himself, is causing serious fluctuations in global oil markets and that, at present, US president’s oil tweets against OPEC, along with the competition between Iran and Saudi Arabia, has turned into an important component in the market.
It is highly unlikely that Trump’s behaviors stem from stupidity. One side of the coin is that he stresses that oil prices are required to be brought down and puts pressure as well as utters threats against OPEC to make the organization’s members lower prices by increasing supply, and on the other side is this very interesting paradox: Although it is possible that some countries such as Libya, Iraq and Canada reduce their oil production, Trump seeks to ban oil purchase from Iran to create a very great tension in oil supply.
3. Within the US, Trump insists that the country is required to achieve oil self-sufficiency and dominance over global energy market by maximizing unconventional or shale oil and conducting more exploration activities.
The humor in Trump’s logic is that in case OPEC member states raise oil supply to an extent that, as Trump wants, crude prices drop to below $ 50 per barrel, the US will hardly have any blood left to increase its shale oil extraction. Unconventional oil in the US is extracted from sedimentary layers in coastal areas.
Given the present level of technology and the number of wells required to be drilled for oil extraction, production of each barrel will cost at least between $ 60 and $ 65. Oil prices falling to below $ 70 per barrel will in fact fail to be economical for shale oil production from sedimentary layers.
4. Trump definitely seeks to weaken OPEC by polarizing the organization in order to turn the US into one of the main decision makers of the global oil market. In this process, Saudi Arabia, as the main representative of the US and main target of Washington’s threats, has announced that it is ready to increase its oil supply.
This will open up a crack in OPEC, which, in the short term, will lead to a drop in oil crude prices. In the long term, however, this trend, due to the shortcomings as well as the probable coordinated moves by other producers, would reverse and the world would witness a sudden jump in prices.
5. It appears that Trump is pursuing other objectives. The US president who is more of a businessman in nature and has a dynamic economic mind, will do his best to cause tension in global oil market advertently. By adopting such a policy, he intends to keep oil prices at a desirable level as, OPEC and, in particular, Saudi Arabia will, under any circumstances, eventually prevent oil prices from increasing to over $ 80 per barrel given its long-term consequences. This price level is very suitable for shale oil production.
Although the US currently imports about 2.5 million barrels of crude oil per day, it announces a new record in shale oil production every week. In case the trend of expanding oil extraction capacities in the US continues this way, in less than two years, the country’s level of technology and unconventional oil production will improve to the extent that it will no longer need to import crude oil.
This increase in oil production will also generate sufficient capital for developing modern and less costly techniques for shale oil production.
Following this period, the US, as the world’s biggest oil producer, would gain absolute dominance over global crude market and, perhaps, would no longer need Riyadh. In such a situation major oil importers such as China, India and the European Union will have to, economically and politically, acquiesce to all US orders and demands to be able to meet their requirements.
Source: Iran Daily
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