Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!
That’s from Donald Trump, who took a few minutes on Wednesday morning to tweet-justify his extraordinarily ill-advised and widely criticized decision to give Saudi Crown Prince Mohammed bin Salman a pass when it comes to the extrajudicial killing of dissident journalist Jamal Khashoggi.
As you’re probably aware, Trump on Tuesday released a wild, exclamation point-ridden statement declaring that no matter who gave the order to have Khashoggi asphyxiated and dismembered in the Kingdom’s Istanbul consulate on October 2, the White House will stick by Riyadh.
In remarks to reporters delivered shortly after that statement was released, he cited oil prices. Here’s the highly amusing clip from the Tuesday edition of everyone’s favorite daytime talk show, “Chopper Talk”:
Once you get done laughing at how Trump continues to insist on calling Mar-a-Lago the “Southern White House”, you’re left to ponder the relative merits of America conducting its foreign policy on the basis of one man’s quixotic war with an inanimate commodity.
To be clear, oil and geopolitics are inextricably bound up with one another and crude is the most financialized commodity on the planet, so in many respects, it makes perfect sense to incorporate oil price considerations into foreign policy decisions.
But Trump takes this to a new level. He deliberately tricked the Saudis (and OPEC+ more generally) into overproducing ahead of the reimposition of Iran sanctions and then, at the last minute, granted waivers to eight nations. Between that gambit, record U.S. production and concerns about a downturn in the global economy, prices plunged into a bear market.
Earlier this month, OPEC slashed its demand forecast for the cartel’s crude in 2019. “Demand for OPEC-15 crude in 2019 was revised down by 0.3 mb/d compared to the previous report to stand at 31.5 mb/d, which is around 1.1 mb/d lower than the 2018 level”, OPEC said in its monthly report. The new demand forecast is well below current production levels.
As noted here on Tuesday evening following oil’s egregious one-day plunge, Trump’s Tuesday announcement on the Khashoggi killing is likely to further endear the President to Riyadh, which may make the Kingdom think twice before agreeing to significant production cuts.
Trump’s Wednesday morning tweet served as further confirmation that at least part of his ongoing war to keep oil prices suppressed is down to concerns about what higher prices at the pump would entail for consumers.
All year, the administration’s “tough on Iran” policy has clashed with Trump’s domestic economic priorities as the renewal of sanctions on Tehran threatened to embed a geopolitical premium in crude, driving up prices at the pump and potentially eating away at the gains that are assumed to have accrued to consumers from the tax cuts.
Of course many argue that the real reason Donald Trump is giving the Saudis a pass comes down to his own business interests in the Kingdom.
On that, we’ll simply leave you with what the President said during the same Tuesday remarks to reporters and let you draw your own conclusions…