Jun 13, 2018, 4:56 PM ET

Trump declares oil prices too high, blames OPEC

#

President Donald Trump blames OPEC for oil prices that he says are too high, and no doubt many Americans feel the same way.

But it's more complicated than that.

Crude has more than doubled since bottoming out below $30 a barrel in early 2016, causing U.S. motorists to face the highest gasoline prices since late 2014.

On Wednesday, the national average for a gallon of regular stood at $2.91, up 25 percent from a year ago, according to the AAA auto club.

"Oil prices are too high, OPEC is at it again. Not good!" Trump tweeted Wednesday morning.

OPEC is the Organization of Petroleum Exporting Countries. Members of the cartel, led by Saudi Arabia, and other big producers including Russia have played a role in reversing the plunge in crude prices that started in 2014. They have shown discipline in limiting production since the start of last year, helping push up the benchmark price of international crude.

Prices, however, were already rising on growing demand and expectations that a sharp pullback in new investment by oil companies would reduce the oil supply.

"Over time it would have happened anyway because of the cutbacks in (drilling) investment, but definitely OPEC's cut in production helped speed the reduction of the oil glut," said Phil Flynn, an oil analyst for The Price Futures Group.

Some estimates put the post-crash reduction in investment by major oil companies such as Exxon Mobil, Chevron and BP at more than $1 trillion. Flynn compared that to eliminating the fourth-largest oil producer in the world.

Meanwhile, output from Venezuela — a major oil exporter to the U.S. — has plunged as the country goes through a political and economic crisis. Most analysts expect production there to go even lower.

While Venezuela is a member of OPEC, "the disaster in Venezuela, which has created a hole in the market, is not the fault of OPEC," said Daniel Yergin, the vice chairman of research firm IHS Markit and author of several books on the energy industry.

Then there is Iran, OPEC's third-biggest producer. The country boosted production after the U.S. lifted sanctions related to Iran's nuclear program in 2016, but analysts expect output to fall when the Trump administration's decision to withdraw from the deal takes full effect later this year.

U.S. companies have filled some of the gap created by Venezuela, OPEC and non-OPEC producers including Russia. Using drilling advances such as fracking, operators in Texas and North Dakota have pushed U.S. production higher.

U.S. oil production has more than doubled in the past decade, including a 19 percent increase since OPEC's limits took effect in January 2017, according to the U.S. Energy Information Administration.

Oil prices have eased slightly in recent weeks. Saudi Arabia has already started pumping more crude. The kingdom reported that it increased production in May to about 10 million barrels a day.

Trump's tweet — similar to one he wrote in April, blaming OPEC for "artificially Very High" oil prices — came a week before a much-anticipated OPEC meeting in Vienna and may have been designed to influence the discussion.

"The president's tweets are really telling the other oil-producing countries to step up your production to make up for the coming sharp declines that are expected in Iranian oil exports," Yergin said.

OPEC is under scrutiny in Congress, too. The House Judiciary Committee approved a bill Wednesday to subject OPEC to U.S. antitrust law by removing state immunity shields. The committee chairman, Rep. Bob Goodlatte, R-Va., said shielding a cartel like OPEC "makes a mockery of U.S. antitrust law, threatens the American economy and has the potential to harm our national security." The measure now goes to the full House.

Jason Bordoff, a Columbia University professor and former energy adviser to President Barack Obama, said politicians always fret when gasoline prices rise before a big election.

"Oil prices have come up a lot, but we're not near $4 gasoline," Bordoff said. "Adjusted for inflation, these prices are not out of line with where we've seen oil prices for the last decade or two."

Democrats are trying to blame Trump for higher gasoline prices, sensing the issue will resonate with voters in the November midterm elections that will determine control of the House and Senate.

Charles Schumer, the leader of Senate Democrats, recently linked $3-plus gasoline to Trump's decision to revive sanctions on Iran. Schumer spoke as he stood in front of the price sign — regular for $3.09 — at an Exxon station on Capitol Hill.

———

Matthew Daly in Washington contributed to this report.

David Koenig can be reached at http://twitter.com/airlinewriter

News - Trump declares oil prices too high, blames OPEC

RRelated Posts

CComments

  • Cecil Nixxon

    Since they eliminated service station attendants and cut that overhead in the 70's the price of gas plummeted. I have saved so much money pumping my own gas that i am convinced I have saved thousands of dollars. Soon my grocery bill will drop, since I am using self service. How can I lose?

  • DuelingDogmas

    Again, Trump fails to understand the machinations of a global system.

    Oil is produced by OPEC. Traders around the world speculate and secure contracts with bids. THEY then resell those contracts on the market for the price they determine. Things like walking back your promises and exiting treaties cause the traders to speculate the future cost of oil given the future conditions that may arise from those actions. If they see more risk they attach more cost to their contracts and the price of delivered contracts goes up.

    So Donnie, as you fart around and interject more risk and uncertainty into the markets with your scorched earth policy, speculators and traders perceive that as higher risk for the future supplies of oil and raise the prices accordingly.

  • Ira Cohen

    But Don, your special friends in the Saudi Royal family, they promised to help us as we gave 'em all those cool weapons to bomb Yemen. Gee, how did that go wrong?
    And then your buddy Putin will somehow let Russia jump in on the bonanza at our expense as well. Nice to have friends in all the right places, Don the Con?
    Oh, yes, pulling out of the Iran deal added a little salt to the soup as well.
    No, presidents are not totally responsible for oil prices nor for a good or bad economy, but you sure didn't do anything to stop this round of increases.,,hitting your base every time they fill up at the pump,

  • LogicandReason

    Thanks Trump.

  • Prophet With Honor

    Filled up at $2.47 Tuesday, highest in my city is $2.79.

  • Gargos

    Unrest in Iran thanks to you, Trump, certainly helps account for some of that.

    However, that being said, after Hurricane Katrina and the recession, Americans should remember the high price of gas and ditching SUV's and trucks in droves. How soon we forget the past. Instead, let's go back to buying more trucks and SUV's, rescind laws on minimum MPG targets and go back to using much more gas than we should. Anybody driving one of these things by choice has absolutely no right to complain about the prices.

  • P bis

    The oil companies helped put Trump in office and he's blaming the Saudis? The economy is booming baloney is nothing but WH hype. Gas is $4 a gallon and this filters down to food and all other aspects of our lives.

  • Millard Farquar

    Oil companies love nothing more than price controls. Takes the guesswork out of planning and results in even higher profits.

  • GorillaMyDreams

    "Oil prices are too high, OPEC is at it again. Not good!"

    Trump always take complex issues and tries to boil them down to simple tweets. I guess his base can't comprehend anything more nuanced or involved than what he says in those tweets.

  • TexasVulcan

    Sorry, President Trump. Crude oil is a commodity. When there is a lot, prices fall. And when prices rise, American oil production increases as it's generally a lot more expensive. So, in fact, high prices generate American jobs.

    Kind of like your tariffs. You get a few jobs but everyone pays the price. At least with oil, it's a natural process and not really man-made.

  • Bud Simpson

    Blames OPEC? You mean just because they limited production to drive the prices higher, Trump has come to the conclusion that higher oil prices is their fault...DUH!

    #Genius

  • ruelph

    Really, when Obama was president and every time the price of oil increased, Trump would blame Obama. Now that Trump is president and the price of oil is increasing, he is blaming OPEC. Another example of Trump being full of it.

  • JR_from_Fla

    That would be wrong it is mostly the oil or commodity traders in the 75% range. Nothing has changed worldwide except sentiment.

  • The Young Fool

    +Everyone's talking oil but ignoring the fact that this is PRECISELY the reason we need to focus on "green energy" and research other methods of providing energy to fuel our needs. Not to mention the polluting of Mother Earth. But Trump wants to drill more. Offshore drilling. Opening our pristine National Parks to more oil drilling. Did you know there have been at LEAST 2 major oil leaks of that disaster called the Keystone Pipe Line. The Native Americans were right! But you don't hear any medial coverage of that nasty mess.

    Forget about oil (use it until we invent cleaner methods)--and get your heads out of the swamp of oil.

  • The Young Fool

    "Oil prices have come up a lot, but we're not near $4 gasoline," Bordoff said.Guess he doesn't live in CA. We here are VERY near $4 gasoline. In fact, I've seen many gas stations charging MORE than $4. I hunt for the $3.75 (less if possible but that has not been possible the last few weeks)

  • Samuel Ryan

    Everyone posting seems to miss the fact that Russia also has decreased production. Isn't it strange the Trump left them out of his attacks?
    Gas prices rose to $4.00 a gallon during the Bush administration and fell to under $2.00 during the Obama administration. They are rising again under a Republican administration. The owner of this bouncing baby barrel is ,...... Drum roll, President Donald J Trump.

  • MickC

    "Crude has more than doubled since bottoming out below $30 a barrel in
    early 2016, causing U.S. motorists to face the highest gasoline prices
    since late 2014."
    This is a ridiculous statement to make because the price dipped because OPEC, led by Saudi Arabia, was waging economic war on America's oil companies, flooding the market with oil, and artificially depressing the price. Saudia Arabia had been pumping 7 million barrels/day through the 2000's, but ramped it up to 10.5 million in 2014.
    This is like complaining that beef has "more than doubled" in price since ShopRite supermarkets ran a $1.99 cent/lb sale last year.
    Back when the prices were running over $100/barrel in 2008, the CEO of BP testified to Congress that the fair price oil companies need to make a fair profit was $65/barrel. Assuming he was a little generous to himself, that's probably a fair value now, a decade later, since shale oil can clearly be pumped profitably at that price.

  • Former Earthling

    Scrapping the Iran deal is having repercussions. Who knew?

  • whitepine

    Oh, Donald just wave your magic wand and make it wonderful for your loyal friends. And don't forget to get on Fox News with your solution.

  • AmazingItsNotOverYet

    Donald Trump is such a petty little fraud.

  • ogrot

    You know what Trump. You should tariff them. That'll lower prices. Just wave your big manly pen at them and they won't know what to do.

  • wilmers13

    The price for gas is tied to the oil price so when you want to sell gas then you want a high oil price.

  • 40words

    Trump is an ignorant moron.

  • John

    Trump the simpleton can only ever join up two dots. He never sees the whole picture.

    He can put sanctions on Iran, OPEC's 3rd largest producer of oil. But he can't see that that reduces oil supply and makes prices higher.

    He can put tariffs on steel. But he can't see that that puts up prices on goods made with steel, and destroys far more manufacturing jobs than the increase in steel jobs. (which is exactly what happened last time there were steel tariffs)

  • Millard Farquar

    The Cheeto's infinite wisdom about all topics big and small is amazing.

  • 40words

    Trump is deflecting from his Canada & NK Summit failures, as well as Cohen now wanting to cooperate with Mueller / SDNY for a plea deal. He should just resign.