Last weekend, after documenting the proceedings of an OPEC+ ministerial meeting in Algiers, we closed with the following quip:
I suppose it’s time for another monarch-to-monarch phone chat between Trump and King Salman.
Funny? Yes. Were we joking? No.
Readers are encouraged to review that linked post for a quick recap of Donald Trump’s ongoing effort to reconcile his “tough on Iran” foreign policy with his desire to see lower prices at the pump for American consumers, but for our purposes here, suffice to say those two goals (cripple Iran’s oil exports and drive down oil prices) work at cross purposes. You cannot deliberately force a bunch of barrels off the market and then expect prices to fall, absent a sharp decline in demand. That’s just not how economics works.
But Trump is a man who insists on having his cake and eating it too, which is why, in the wake of pulling the U.S. out of the nuclear deal and insisting that everyone cut their imports of Iranian crude to zero, the President attempted to bully OPEC and Russia into engineering a supply glut in order to offset the geopolitical risk premium he deliberately embedded in crude prices.
Here, for those who missed it, is the annotated history of one man’s quixotic battle with an inanimate commodity:
Last weekend’s OPEC+ meeting came hot on the heels of Trump’s latest Twitter broadside (the latest annotation in the visual) and much to his chagrin, the Saudis did not acquiesce, where that means ensuring that production would be ramped up ahead of the U.S. midterms.
Trump wasn’t amused, which is why, during his absurd speech to the U.N. General Assembly on Tuesday, he said this about the cartel:
Now for one thing, I have never liked that characterization of OPEC and I like it even less when it comes out of Trump’s mouth. When you’ve got something other people don’t have but want (in this case oil), it’s not entirely clear why you are required to sell it at a price that’s agreeable to consumers. Obviously, if you raise prices too much, people will stop buying and look for substitutes, but up to that point, you can charge what you want.
That’s a gross oversimplification and borders on being spurious in the context of oil, but you get the point. They’ve got it, everyone else wants it, so short of a scenario where they are charging so much for a necessary commodity that it imperils global security and/or threatens to push the world into recession, why exactly is it that they (OPEC) should care about something as myopic as making sure prices at the pump stay low ahead of the U.S. midterms? Is it OPEC’s job to help make sure Congress doesn’t flip to Democrats?
Anyway, I digress.
The point here is that the clip above was basically Trump’s rejoinder to the recalcitrance on full display at last weekend’s OPEC+ meeting and it was clear from his comments that a call to King Salman was coming, if it hadn’t already taken place.
Sure enough, Trump and the monarch spoke over the phone on Saturday and oil came up. Here’s all we know right now, via Al Arabiya:
Saudi Arabia’s King Salman bin Abdulaziz Al Saud received a telephone call from United States President Donald Trump on Saturday.
During the call, they discussed the distinguished relations and means of developing them in the light of the strategic partnership between the two countries. They also discussed developments in the region and the world.
Now let’s wait on the Trump tweet, where the President will explain, like he did on June 20, how he convinced King Salman to “increase oil production, maybe up to 2,000,000 barrels, to make up the difference.”