Surging oil prices rattle President Trump

The oil market has caught President Trump in an awkward spot between his pro-business instincts and his populist tend...

Posted: Apr 20, 2018 7:46 PM
Updated: Apr 20, 2018 7:46 PM

The oil market has caught President Trump in an awkward spot between his pro-business instincts and his populist tendencies.

Trump, a major friend to the fossil fuels industry, took OPEC to task on Friday for the recent surge in oil prices. The price has climbed toward $70 in recent weeks, the highest in more than three years.

"Looks like OPEC is at it again," Trump tweeted. "Oil prices are artificially Very High! No good and will not be accepted!"

Trump is right that OPEC, the Saudi-led cartel, has orchestrated higher prices, as it's known to do. And millions of American voters will probably share the president's outrage if gasoline prices soar as a result.

Yet millions of Trump voters also live in states such as Texas, Oklahoma and North Dakota that depend on the oil industry for prosperity. The 2014-2016 oil price crash cost countless jobs and led to dozens of corporate bankruptcies.

Trump has pushed an agenda of American "energy dominance" by slashing environmental regulations and green-lighting pipeline projects.

"These oil-producing states are Trump red states. They're part of his coalition," said Joe McMonigle, senior energy policy analyst at Hedgeye Risk Management, an investment research firm. "To have energy dominance you need higher prices to support investment."

Trump has close ties to Harold Hamm, the billionaire who runs Continental Resources, a shale oil producer that benefits from higher oil prices. Hamm gave a primetime speech during the 2016 Republican convention, and Trump reportedly considered naming the CEO his energy secretary.

"The president is going to hear from Harold Hamm" about his tweet, said McMonigle, a top Energy Department official under former President George. W. Bush.

Continental Resources did not respond to a request for comment.

Trump portrays himself as pro-business, but he has also attacked major American companies like Amazon, threatened to start a costly trade war with China and gone after drug makers for high prices.

Related: Forecast: You'll pay 14% more for gas this summer

Trump's attack on OPEC could also conflict with his efforts to improve relations with Saudi Arabia, the country pulling the strings at the oil cartel.

The timing of Trump's tweet is intriguing because OPEC's strategy hasn't changed recently.

What has shifted is the impact. Oil prices have soared 12% this year, and the price of gas has jumped to a national average of $2.75 a gallon.

That's partly because of production cuts by OPEC and Russia, which have successfully mopped up the huge supply glut that caused prices to crash. Officials from OPEC and Russia met on Friday to take a victory lap for their coordinated action.

"OPEC hasn't done anything different since early 2017," said Spencer Walsh, oil market analyst at IHS Markit.

"The tweet, in my opinion, is a little misleading and not fully factual," he said.

Trump himself shares blame for the more recent jump in oil prices. Geopolitical uncertainty briefly caused by US airstrikes in Syria helped lift prices earlier this month. Oil traders are also nervous about Trump's threats to reimpose sanctions on Iran, a move that could risk up to 1 million barrels per day of oil supply.

"A lot of the reason for higher prices is the president's policy on Iran," McMonigle said. "You're talking about a huge amount of oil at risk. You're going to see prices spike. That's US policy. It's not anything OPEC has done."

And then there's Venezuela, the crumbling OPEC country where instability has driven down production. The Trump administration is considering imposing oil sanctions on Venezuela that could further drive down supply.

"The thing that's kicked up the price is the geopolitical escalation, globally," Walsh said.

Related: Saudi oil shipments to America plunge to 1988 levels

Oil prices have also been lifted by resurgent appetite for energy around the world. Global oil demand grew during the first three months of 2018 by the most since late 2010, according to estimates by Goldman Sachs. The investment bank projected that Brent crude, the global benchmark, will rise to $80 a barrel this year, up from $75 today.

Trump's tweet noted that there are "record amounts of Oil all over the place."

Of course, OPEC and Russia are certainly not pumping at full capacity. Yet production in the US, driven by the shale oil boom, has climbed to record highs. The US is even expected to eventually topple Saudi Arabia and Russia as the world's No. 1 producer.

Trump has sought to encourage more production by cutting environmental regulations. He also advanced the controversial Keystone and Dakota Access pipelines.

What he can't do, at least by himself, is keep oil prices from rising to levels that hurt the economy and upset drivers.

"Other than presidential tweets," McMonigle said, "the federal government doesn't have a lot of tools at its disposal to affect prices."

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 22947

Reported Deaths: 977
CountyConfirmedDeaths
Hennepin7695581
Ramsey2698110
Stearns199512
Nobles14963
Anoka128963
Dakota120249
Olmsted58210
Washington57630
Kandiyohi4761
Rice4232
Clay41625
Scott3832
Todd2960
Wright2801
Mower2311
Sherburne2222
Carver1892
Benton1733
Steele1490
Blue Earth1261
Martin1265
St. Louis11714
Freeborn1020
Unassigned9410
Pine890
Nicollet827
Winona7815
Carlton730
Cottonwood690
Watonwan640
Otter Tail630
Goodhue603
Polk592
Crow Wing591
Chisago541
Itasca548
Dodge460
Le Sueur441
Meeker440
Chippewa441
Morrison410
Jackson390
Douglas390
Lyon380
Murray360
Becker360
Isanti320
McLeod300
Waseca250
Rock220
Mille Lacs191
Wabasha170
Fillmore171
Pennington170
Swift170
Sibley150
Beltrami140
Brown142
Cass132
Faribault130
Wilkin113
Norman110
Kanabec111
Pipestone100
Marshall90
Wadena80
Pope80
Aitkin70
Koochiching70
Yellow Medicine60
Lincoln50
Mahnomen51
Renville50
Big Stone40
Red Lake40
Redwood40
Clearwater30
Traverse30
Lac qui Parle30
Grant30
Houston20
Roseau20
Hubbard10
Lake10
Kittson10
Stevens10

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 18559

Reported Deaths: 506
CountyConfirmedDeaths
Polk3930118
Woodbury267232
Black Hawk172443
Linn94176
Marshall88215
Dallas87517
Buena Vista7020
Johnson6078
Muscatine54941
Wapello5456
Crawford4892
Tama40026
Scott35210
Louisa34210
Dubuque33418
Jasper25816
Pottawattamie2348
Sioux2130
Washington1858
Wright1450
Allamakee1204
Plymouth1191
Warren1160
Story991
Mahaska918
Poweshiek898
Bremer676
Henry671
Clinton601
Des Moines591
Boone570
Taylor490
Guthrie463
Cedar461
Clarke450
Benton391
Monroe385
Jones360
Iowa350
Shelby340
Clayton323
Osceola320
Buchanan320
Webster321
Marion310
Hamilton290
Madison271
Fayette260
Cerro Gordo251
Monona240
Cherokee240
Lee240
Winneshiek230
Davis200
Grundy190
Lyon190
Jefferson190
Harrison190
Floyd181
Sac170
Dickinson160
Mills160
Hardin160
Hancock160
Humboldt150
Butler150
Delaware150
Appanoose143
Ida140
Keokuk140
Greene130
Clay130
Howard120
Audubon121
Emmet120
Lucas120
Cass110
Jackson110
Page110
Winnebago110
Franklin100
Pocahontas100
Carroll90
Van Buren90
Kossuth90
Chickasaw80
Adair80
Union70
Adams70
Montgomery60
Mitchell50
Ringgold40
Fremont40
Palo Alto30
Worth30
Calhoun20
Wayne10
Decatur10
Unassigned10
Rochester
Clear
59° wxIcon
Hi: 72° Lo: 50°
Feels Like: 59°
Mason City
Clear
60° wxIcon
Hi: 75° Lo: 52°
Feels Like: 60°
Albert Lea
Clear
63° wxIcon
Hi: 75° Lo: 51°
Feels Like: 63°
Austin
Clear
63° wxIcon
Hi: 75° Lo: 52°
Feels Like: 63°
Charles City
Clear
61° wxIcon
Hi: 73° Lo: 51°
Feels Like: 61°
Lingering showers Thursday AM will turn to sunshine by the afternoon
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Sean Weather 5/28 2

Image

Churches prepare to allow hundreds in doors

Image

Sean Weather 5/28

Image

Destination Medical Center boosting Rochester Recovery

Image

Protests at Henneppin County Government Center

Image

Rochester reacts to Minneapolis situation

Image

Unemployment numbers in Rochester

Image

DMC's five year plan and COVID-19

Image

Salvation Army Needs Hygiene Products

Image

Giving Back To Essential Workers

Community Events