Analysis: Trump hit by challenges seeking cheap oil

Analysis: Trump hit by challenges seeking cheap oil

The rising oil prices are making the oil producers happy, but this is not a good news when it comes to the major oil consumers. The industrial economies, meanwhile, which are the largest energy consumers, take the biggest influence.

(AhlulBayt News Agency) - The rising oil prices are making the oil producers happy, but this is not a good news when it comes to the major oil consumers. The industrial economies, meanwhile, which are the largest energy consumers, take the biggest influence.

But they do not appear to stand and do nothing. The US, for example, has started efforts to influence the oil prices hike ahead of OPEC (Organization of Petroleum Exporting Countries) meeting on June 22 and 23 to decide on the production levels. In its last summit, OPEC decided to cut its member states’ daily oil supply by 1.8 million barrels, emphasizing that this decision is valid by the end of 2018. But the latest global developments including the US President Donald Trump’s withdrawal from the Iran nuclear deal have pushed the organization to take new steps. In his latest tweet, Trump complained about what he called high oil prices, saying OPEC is responsible.

This is the second time in past few months that Trump blasts oil prices rise. In April, Trump also blasted OPEC on Twitter, accusing the group of “artificially” raising oil prices.

“Looks like OPEC is at it again,” Trump said in an April 20 tweet. “With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted.”

Two tweets, in both of which the US president attacked the OPEC, showed that the controversial leader after 17 months of highs and lows in the home and foreign policy now has decided to direct his verbal fire at the oil organization. What is his oil policy and why does he attack OPEC 17 months after assuming the power at the White House?

Trump’s oil policy and two main challenges

The US president’s policy logic indicates that economy is a top case in his administration’s foreign policy. His desire to show bright economic performance statistics, especially in the fight against unemployment, has led him to resort to domestic oil production raising which could mean creating new job opportunities. The Forbes, which specializes in the economy, has confirmed that the US oil and gas production has increased under Trump, adding that he aims to continue the increase. The website maintained that contrary to other fields, Trump is not interested in changing the oil game rules. The US oil production, therefore, serves Trump’s intention to relatively control the global oil prices on the one hand and also help him create new jobs on the other hand.

Still, his oil and gas policy is largely tied to the developments out of the American borders. Tariffs on the foreign goods as well as the future of the dispute with Iran are the two main foreign challenges influencing Trump’s oil policy. In fact, the trade war with global powers as well as Iran nuclear deal uncertainty cause concerns about oil prices hike despite US oil production increase.

Additional tariffs on the foreign goods provoke a reaction from the US trade partners such as China and the European Union. The energy prices naturally augment in the middle of a commercial dispute.

Moreover, Trump’s confrontation of Iran, one of the five largest oil producers, naturally leaves direct impacts on the energy markets. Washington announced that upcoming sanctions against Tehran will cut its oil supply to the global markets by 20 percent monthly. In case of taking effect, the ban will pose serious challenges to the energy consumers. Currently, Iran has a 4-million barrels share in the oil market. Any efforts to eliminate such huge supply will seriously disturb the global markets.

Seeking cheap oil

A fear of oil prices surge along with the trade war and Iran confrontation has drawn a reaction from the American president. Now we can better understand why he has directed his verbal attack against the OPEC.

Over the past two months, he blasted rise in oil prices while the Department of Treasury has been busy working out a mechanism to implement the tariffs on steel imports, a move drawing responses from Beijing and other Washington trade partners. It appears that the US administration expects long-lasting high oil prices along with the eruption of a commercial fight with the other giant economies. That is perhaps the main issue causing Trump to harshly criticize the higher oil prices.

Trump tweet attacks on the OPEC can hardly leave a considerable impact on the oil prices. But they on the other side exhibit the White House’s plans to confront the oil organization and the upward oil prices fluctuations. Now, we should wait and see what strategies will be used in the upcoming months by Trump as a response to OPEC’s show of independence in decision making. Sowing divisions among the OPEC member states is an expected White House trick in the upcoming months. The Trump’s plan implementation is expected to gain support of the Persian Gulf Arab states. In the current circumstances, Trump counts on the Arab members of the OPEC which are inclined to positively respond to Washington’s demands to help confine the rising global energy prices challenge.

Saudi Arabia announced that it is ready to fill the Iranian place in the market once the latter is hit by the US embargo. Riyadh’s green light, many analysts agree, is meant to ease the American worries and signals that an alliance between Washington and Riyadh aims to minimize the side effects of the anti-Iranian oil embargo. Last week, an official at the Saudi oil ministry said the Arab kingdom is working with major oil suppliers and buyers inside and outside of the OPEC to decrease the effects of possible Iranian oil supply drop after Trump sanctions re-imposition.

But the possibility of Trump’s success by attacking the OPEC and receiving assistance from the Arab allies, on top of them Saudi Arabia, is still shrouded in mystery. It is yet to be clear how Washington wants to manage other effective factors like Europe’s opposition to renewed US sanctions on Tehran, Chinese and Russian alliance in the US face, and rising global demand for oil.

What is obvious is that the US does not control all of the factors pushing up the oil prices, something that makes Trump’s quest for cheap oil considerably tough.


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