Crude oil prices are tanking, and for that, you can thank Donald Trump for pulling one over on Saudi Arabia.
From the beginning of 2018 until October, crude oil prices surged from under $60 per barrel to over $75. You probably were unaware of the specifics – but it’s impossible not to have noticed at the pump. However, since peaking at $76 a barrel in early October, the bottom has fallen out from the price of crude, collapsing it as low as $55 per barrel in early November.
Why oil prices fell so far
Saudi Arabia has the second-largest oil reserves in the world after Venezuela (who still couldn’t make socialism work despite that), and as such, is one of the largest oil-producing nations in the world. So why has the price for oil fallen so far, so fast?
As CNBC reported:
“Saudi Arabia pulled off a challenging U-turn in global oil market policy, convincing a fractious group of two dozen nations to hike output and undercut the oil market rally that was filling their coffers. The Saudis undertook this unpopular task at least in part to help its allies in the White House — and for its troubles, the kingdom was rewarded with a series of blistering tweets from President Donald Trump and the biggest pullback in oil prices since the historic downturn of 2014.”
You read that right – the Saudi’s encouraged other nations to boost oil production (thus lowering the price of oil) as to not annoy Donald Trump. High oil prices have drawn Trump’s wrath on Twitter before. Below are some tweets from earlier in the year:
Looks like OPEC is at it again. 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!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
Oil prices are too high, OPEC is at it again. Not good!
— Donald J. Trump (@realDonaldTrump) June 13, 2018
But less than two weeks after the second tweet, Trump gave us an update:
Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference…Prices to high! He has agreed!
— Donald J. Trump (@realDonaldTrump) June 30, 2018
And then look what happened…
How Trump pulled it off
But the whole story isn’t quite as clear-cut as Trump outlined, where he simply requested an increase in production and got it. Personally, I think the true story paints Trump in an even more effective light.
According to CNBC, oil analysts are in agreement that Trump “hoodwinked” Saudi Arabia into pushing the global oil market into oversupply. “They got sort of tricked here,” said John Kilduff, the manager of a hedge fund that specializes in energy-related investments. “The Russians and the Saudis in particular ramped up production, ramped up exports ahead of what was supposed to be severe sanctions on Iran, and when the administration gave the eight waivers to Iran’s largest buyers, it undercut that whole equation” he continued.
“So now we’ve tripped into an oversupply situation almost overnight because of the severe reaction by Russia and the Saudis to cover for Iran losses, which never materialized.”
A brilliant move on Trump’s part, for sure.
Next time you fill up at the pump and notice the difference, you can thank Trump’s art of the deal for it.
