Donald Trump sent the oil market into a tailspin Monday with one tweet claiming oil prices are too high and blaming OPEC for it. Is Trump unaware that oil prices are a function of supply and demand? Or is he deliberately shifting the blame off his destructive embargo of Venezuela?
Though it is a fact that oil prices are at a three month high, “Oil prices are getting too high,” is merely Donald Trump’s opinion.
And calling the world “fragile” and suggesting higher oil prices would be some kind of catastrophe is an alarmist narrative.
Trump’s overly-dramatic tweet fits in nicely with the Goldman Sachs report from earlier today predicting that Brent Crude oil will go even higher to $75/bbl before the end of the year.
But trying to scare up a panic over oil prices is a cry for attention from the sitting president, one that fits in with his television persona as a tough world negotiator.
That Goldman Sachs report also said the $70-$75/bbl trading range would be temporary:
“‘While prices could easily trade in a $70-$75/bbl trading range, we believe such an environment would likely prove ﬂeeting,’ according to Goldman’s global head of commodities research Jeffrey Currie and senior commodity strategist Damien Courvalin.”
And oil prices are determined by supply and demand. So they’re not “too high,” as Donald Trump avers. They’re at the level that reflects supply and demand.
One reason oil prices are higher is because of involuntary supply curbs in socially and politically unstable Libya and Nigeria.
In Libya, the National Oil Corporation refuses to start production in the Sharara oil field, the North African country’s biggest.
The facilities were recently seized by a Libyan militia group, and the oil company’s chairman says the militia has “committed violent and terrorizing acts against workers.”
In Nigeria, contentious political elections underway now have dampened the country’s oil production. Western military interventions have destabilized both countries.
That includes a bill signed by President Obama in 2016 to station U.S. military boots on the ground in Nigeria, stirring up more armed conflict there.
It also includes the Obama administration’s 2011 regime change intervention in Libya, backed by British and French intelligence, as well as U.S. air power.
The result was an unmitigated catastrophe of violent civil disorder, warring factions, and a deluge of new terrorist recruitment, training, and planning in the power vacuum left by the relatively stable, secular government of Muammar Gaddafi.
What makes the intervention in Libya all the more baffling is what a close partner Gaddafi had been with both the Bush and Obama administrations in the Global War on Terror/Overseas Contingency Operation after 9-11.
So the previous administration and both major political parties in Washington deserve their share of the blame for the 300,000 barrels a day that aren’t pumping through Sharara.
Oil prices are also higher than they would have been otherwise as a result of Donald Trump’s own half-baked geopolitical interventions as president of the United States.
Most notably, the White House blockaded oil shipments to and from Venezuela with an embargo on Venezuelan oil last month.
In a research note Monday, Goldman Sachs said the disruption in oil supply from Trump’s embargo on Venezuela is likely to reach as high as 300,000 bbl/d in the coming months:
“While the decline in net exports has been softened so far by the use of domestic light crude for blending, we believe Venezuelan disruptions are likely to accelerate in coming months to potentially 200-300 kb/d if no political resolution occurs.”
At today’s OPEC Reference Basket price of $66/bbl, that’s $6.8 billion worth of oil annually that Donald Trump is personally responsible for keeping stuck in Venezuela.
So if the world is really so fragile that it can’t take an oil price hike, then instead of telling OPEC to loosen up and take it easy, Donald Trump should take it easy on Venezuela.
Donald Trump Image from AFP PHOTO / JIM WATSON
Last modified: September 23, 2020 12:27 PM