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Oil Prices Are Rising. Don't Expect Trump's Tweets to Lower Them.

If the president does want to lower oil prices, he could push Congress to expand domestic oil production.

Xinhua/Sipa USA/NewscomXinhua/Sipa USA/NewscomGas prices are beyond the ability of any American president to control, but that didn't stop President Donald Trump from trying to resolve a complex issue with the bluntest of policy tools: his Twitter account set to all-caps.

With oil prices rising to three-year highs last week, Trump exhorted the Organization of Petroleum Exporting Countries (OPEC) to "REDUCE PRICING NOW!"

This isn't the first time the president has gone after OPEC on Twitter recently:

Iran snapped back at the accusation of OPEC price gauging, accusing Trump of creating market uncertainty and raising oil prices with his tweets. Iran also accused Trump of being the reason for the surge in oil prices through his sanctions on Venezuela and Iran, both members of OPEC.

Meanwhile, North America has enough fossil fuels to last us for "generations," but government policies often stand in the way of exploiting these resources. If Trump really wants to reduce oil prices in America, he should start there.

"If the U.S. government were to relax regulations on offshore oil resources and expedite having companies develop oil resources that are on federal land, then the U.S. would not nearly be as dependent on OPEC as it currently is," says Robert Murphy, an economist at the Institute for Energy Research. Freer markets in the energy sector would severely undercut the OPEC cartel and would reduce energy costs for American consumers, who will undeniably benefit from the increased competition.

The president is right that oil prices are rising, and he's partly correct that OPEC is "doing little to help," insofar as OPEC isn't producing enough oil to cope up with market demand. But that's more of an issue with specific policies that certain OPEC nations have adopted, and not, as the president seems to believe, a conscious conspiracy to hurt American consumers. In fact, Yahoo Finance reported Thursday that Saudi Arabia will reduce the price of a barrel of light oil from $2.10 above the Middle East benchmark price to $1.90 above it.*

Crude Oil Pricesmacrotrends.net

Iran's response is also a bit of a half-truth. Yes, sanctions have had a big effect on Iranian oil production, but that isn't necessarily the case with Venezuela.

"Sanctions on Iran are having a chilling effect on their ability to sell oil on the world market," says Murphy. "With Venezuela, I would say that's more the fault of their domestic policies that are crippling their economy overall."

*This post has been updated to correct Saudi Arabia's recent reduction in the price of light crude oil. The price has reduced to $1.90 above the Middle East benchmark price per barrel, not to $1.90 per barrel.

Photo Credit: Xinhua/Sipa USA/Newscom

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  • Fist of Etiquette||

    Iran snapped back at the accusation of OPEC price gauging, accusing Trump of creating market uncertainty and raising oil prices with his tweets.

    So the thinking there is that his tweets can raise oil prices?

  • Fist of Etiquette||

    If the U.S. government were to relax regulations on offshore oil resources and expedite having companies develop oil resources that are on federal land, then the U.S. would not nearly be as dependent on OPEC as it currently is...

    Hold off until the twittersphere needs a fresh outrage.

  • Bubba Jones||

    Aren't we the largest producer of oil, or close to it?

    My FIL was an economist and he was convinced that the commodities markets, including oil, are manipulated. I doubt it's being done by the Saudis. Recall the recent story about the agreement to default on a bond payment that triggered an insurance payout. Our markets are full of that.

  • NotAnotherSkippy||

    Oil is a prisoner's dilemma with inherent under and overinvestment leading to booms and busts. Fracking helps a little because it has much less latency than traditional or deep water fields.

  • John||

    You can't just go out and drill an oil well. You also can't just go buy a more fuel efficient car or move closer to work because the price of gas is high. Once prices start going up it takes a long time for the supply to increase. It also takes a long time for the demand to significantly drop. It is just the nature of the commodity.

  • NotAnotherSkippy||

    Fracking helps. You can bring a well online much faster. Still not perfect.

  • NotAnotherSkippy||

    If the U.S. government were to relax regulations on offshore oil resources and expedite having companies develop oil resources that are on federal land, then the U.S. would not nearly be as dependent on OPEC as it currently is...

    So aside from lifting Barry's moratoriums and opening up ANWR you mean. Of course a chunk of the problem is permian basin capacity is becoming transport limited. Does that mean that reason now supports eminent domain to improve pipeline capacity?

  • buybuydandavis||

    On transport limitations, see also the Trump administration approving the Keystone Pipeline.

    Natural Gas and Crude Oil production at highest levels in a decade
    https://www.eia.gov/petroleum/production/#ng-tab

    But let's complain about Trump not getting Congress to do what they can do, because all that's important is publishing reasons to hate Trump.

  • General_Tso||

    Well, if Obama could lower the oceans merely by his being elected president, then surely the laws of supply and demand could be affected by Trump's mighty phone and pen, no?

  • Palin's Buttplug||

    Crude peaked at $147/bbl during the Bushpig years.

    Expect that high to be taken out by 2020 eoy.

  • NotAnotherSkippy||

    Disappointed that your hero barry couldn't get it over 200? Well at least he tried. Boots on the neck and all.

  • The Narrator||

    Be nice, the fact that the average cost was higher for Obama than any president ever wasn't his fault somehow.

  • buybuydandavis||

    "Peak oil is coming! Beware!"

  • John||

    The beauty of this is that the US no longer imports much oil. In the past when we did import a lot of oil, a rise in the price of oil represented a real loss in wealth as we had to send more money overseas for oil. Now, a rise in the price of oil just moves money around inside the economy. Consumers lose but producers get rich. A couple of years ago when there was a glut and prices were down, the economy didn't receive much of a boost like it had in the past. This is because we were no longer importing much oil and the money gained by consumers was just lost by domestic producers. The same is true in reverse now that prices are rising. It won't have nearly the same negative effect on the economy it once did.

    And oil because of the inelastic nature of both supply and demand has always been a boom and bust economy. It will take a while for supply to rise and demand to fall. In the meantime prices are going to continue to go up. But once supply catches up with demand, the price will fall just as fast and just as far as it is rising now.

  • NotAnotherSkippy||

    We still import plenty of oil but not a majority like we did a decade ago. And OPEC only matters because of oil fungibility. Our imports come from the western hemisphere by a huge margin.

  • John||

    We import more oil than I thought. Right now we import about 250,000 barrels a month. But that is down from the 300,000 a month we imported as recently as five years ago. And as a percentage of total use, down even further than that.

    And yes, OPEC doesn't really matter anymore.

  • NotAnotherSkippy||

    We will probably never be energy independent until we embrace nuclear, but the key now is that fracking has basically killed the ability of foreign producers to shock the economy thru supply disruptions.

  • Palin's Buttplug||

    You missed this, you piss-ant.

    Right now we import about 250,000 barrels a month.

  • NotAnotherSkippy||

    He shares your affinity for accuracy. What can I say? Now run along before I make you cry again.

  • MatthewSlyfield||

    How much of that comes from Canada as opposed to OPEC countries?

  • Leo Kovalensky II||

    OPEC sill produces a lot of oil globally, roughly half of the total production. Even if we don't import a lot of it in the US, it still has the ability in the short-term to have a lot of influence over global prices because it is fungible (as Skippy pointed out).

  • Furzeydown||

    John - you probably misread that somewhere. It's actually x1000 that, so the measurement would have been in *Thousand Barrels per day*. We currently import 8 mil a day, see here : http://ir.eia.gov/wpsr/overview.pdf

  • Palin's Buttplug||

    We import 2.5 million barrels a day, you dim of the dimmest jackoffs.

  • John||

    Which is much less than we once did, especially as a percentage of the economy.

  • NotAnotherSkippy||

    Try again, dipshit.

  • Palin's Buttplug||

    You fuckers can't read your own links.

    It says we have "net imports" of 3.7 MILLION barrels a day.

  • NotAnotherSkippy||

    3.7 is larger than 2.5 moron.

  • Palin's Buttplug||

    3.7 was the average in 2017. My info is for 2018.

    Now STFU.

    Why not make fun of John's ridiculous "250,00 barrels a month"? He is more your intellectual lightweight class.

  • NotAnotherSkippy||

    Post your source. Oh, that's right. It's a forecast.

    God you're an idiot.

  • Palin's Buttplug||

    We were using present tense. 2017 is old news and data is available for half of 2018.

    I am just more accurate than you are, as always.

    John is an idiot. Can we agree on that?

  • The Narrator||

    I kind of love that the person using forecasts as though they were actual numbers is bitching about accuracy.

  • Leo Kovalensky II||

    Even more interesting is that they are arguing about 3.7 vs 2.5 million per day, but John gets a pass when he says 250,000 per month (ie 3 orders of magnitude lower)

  • The Narrator||

    I guess you didn't read the thread if you think John got a pass.

  • loveconstitution1789||

    We agree that Butt is an idiot.

  • NoVaNick||

    Investors buying up oil futures and increasing demand from countries like China and India have a lot more influence over oil prices than any POTUS. Production can be increased only by so much to respond to demand. Prices should fall a lot if Trump's tariffs cause a recession.

  • perlchpr||

    Right.

    With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High!

    "Record amounts" of oil being produced won't lower prices if demand is hitting an even higher record amount.

  • Agammamon||

    In fact, Yahoo Finance reported Thursday that Saudi Arabia will bring down the price of a barrel of light oil from $2.10 to $1.90.
    . . . lowered August prices for light oil to Asia by 20 cents to $1.90 a barrel above the Middle East benchmark

    CHRIST!

    If gas is selling for $2.50+ a GALLON then oil is not going to be selling for two dollars a *barrel*. The freaking *Yahoo* article you're getting your facts from can make this distinction clear but you can't?

  • Agammamon||

    Oil is selling for around $73 a barrel right now. If it was selling for $2.10 everybody would be rejoicing. They'd be giving it to the cat because its cheaper than milk.

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