President Donald Trump has once again cast blame on OPEC for high oil prices, even though his own policies have helped fuel the surge.
In a tweet on Thursday, Trump blasted OPEC for continuing to “push for higher and higher oil prices.”
“The OPEC monopoly must get prices down now!” Trump said, adding that countries in the Middle East would not be “safe for very long” without protection from the United States.
Trump is right to point to OPEC as a cause. In a bid to mop up excess supply, OPEC teamed up with Russia two years ago to cut production. The strategy worked. US oil prices have nearly tripled since crashing to $26 a barrel in early 2016.
But prices have continued to climb this year — and analysts point to Trump’s hardline stance on Iran. The administration’s sanctions against the world’s fifth-largest oil producer will knock out a significant amount of supply at a time when it’s needed. After starting the year around $60 a barrel, US oil prices raced above $74 this summer. Crude is currently trading at $71 a barrel.
“The reality is the market is tight because Iranian sanctions are forcing countries to find alternatives,” said Ben Cook, portfolio manager at BP Capital Fund Advisors.
In his latest attack, Trump slammed OPEC as a “monopoly.” Yet OPEC is considered an international cartel, not a true monopoly, because it does not have exclusive control of oil.
In fact, just last week Trump’s own Energy Department announced that the United States surpassed Russia and OPEC leader Saudi Arabia in oil production. It’s the first time since 1973 that the United States is leading the world in oil output.
The milestone was made possible in large part by higher oil prices, which allowed America’s shale oil producers to ramp up output.
In any case, it’s clear the oil market has caught Trump in an awkward spot between his pro-business instincts and his populist tendencies.
Pro-business Trump has been slashing environmental regulations and pushing for American energy “dominance” — an outcome that requires higher prices.
The recent surge in US oil production, led by the Permian Basin of West Texas, has allowed the energy industry to quickly recover from a deep slump that killed thousands of jobs and caused dozens of bankruptcies. Millions of Trump voters live in major oil-producing states such as Texas, Oklahoma and North Dakota.
However, many Americans are unhappy to see that energy prices are on the rise. The national average gas price has climbed to $2.85 a gallon, compared with around $2.25 two years ago, according to AAA. Pain at the pump threatens to wipe out some of the benefits from the Republican tax cuts.
“Midterm elections are coming up and high oil prices are bad PR for the party heading into the election,” said Cook.
Trump’s latest attack on OPEC accurately highlighted the American military presence in the Middle East.
The US Navy plays a pivotal role safeguarding the Strait of Hormuz, the most critical chokepoint for the transit of oil in the world.
Over the decades, Iran has repeatedly threatened mischief in the Strait of Hormuz, where one-fifth of the world’s traded oil passes through. In August, Iran’s Islamic Revolutionary Guard Corps held a naval exercise in the waterway.