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Trump Asks to Lower Price of Oil

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WASHINGTON - February 27, 2019

Trump is again trying to use his personal Twitter account as remote control for reality. A cursory glance may seem to show he does it well: For example, yesterday after his tweet that oil is too expensive, the price of black gold on the stock exchanges in New York and London did fall by a few dollars.

However, a closer look at the situation shows that participants in the oil market are not afraid of the American President’s tweets.

The most interesting thing is that Trump’s oil tweet bears an extremely uncharacteristic pleading tone.

Anyone could notice that Trump has moved away from the traditional American approach in terms of the use of threats and pressure, namely, asking OPEC not to raise prices higher and trying to convince, not intimidate, although in his case it would be logical to refer to possible sanctions or the so-called "NOPEC bill" which now lies in Congress and, if adopted, could allow the U.S. Department of Justice to try to punish the countries participating in the oil deal. However, Trump made a very different reference, writing that "the world is fragile" and will not stand. This is most likely what scared the market.

When the American leader publicly admits the world economy is so fragile that it will break down from the next increase in oil prices, from the point of view of many market participants, this situation is a reason to panic in advance. Oil prices often reflect expectations not only of world production but also of world oil demand. In fact, Trump stated that there will be serious problems with demand in the global economy.

In addition to purely economic considerations, the American leader was probably guided by geopolitical considerations related to the situation in Venezuela. If you look at the crisis there in terms of its impact on the oil market, it turns out to be quite unpleasant for the US picture: Rater tough sanctions were introduced recently against Caracas that prevent Venezuela from exporting oil, which pushes prices on the world market up, while no progress in terms of the color revolution, which the State Department launched after Juan Guido's recognition, is seen.

The recent scheme failure to break the Venezuelan border with the help of a humanitarian convoy, as well as Bloomberg reports that even American allies in the region — Peru and Colombia — don't support military intervention against Venezuela, indicate that American hopes for the imminent flooding of the Venezuelan oil market (already under American control), most likely, will not come true. If this is a correct assessment of the situation, then Trump's statement via Twitter to OPEC countries is rather a gesture of despair.

It's likely Trump's concern about "world fragility" means primarily concern about the American economy. His oil tweet was published on the same day as the American National Association for Business Economics survey — a reputable NGO that brings together experts on macroeconomic factors’ impact on business. According to this survey, the US economy will enter recession in 2021.

According to Bloomberg, "ten percent saw a recession beginning this year, 42 percent project one next year, while 25 percent expect a contraction starting in 2021." Translated from the language of economic forecasts into the language of political prospects, this means Trump faces the prospect of holding an election campaign with not a growing but a falling American economy, and any American political strategist will confirm that to retain the presidency in a recession is an extremely difficult task, which in the case of Trump is aggravated by the fact that many voters tolerate him solely for economic reasons.

That is why where many commentators have noticed a sign of some special "Trump force" that can affect the oil price, American journalists saw only the President's attempt at least for some time to secure a comfortable environment in the upcoming election campaign. Reuters columnist and energy analyst John Kemp tweeted in this regard:

From the point of view of preserving the image of world hegemony, Washington’s actions are extremely toxic — because everyone can see that the White House can no longer negotiate on issues important to it from a position of force. Moreover, the petition of the American leader hides another important point — if Trump is forced to turn to requests to OPEC countries to stop the price increase, that means that all the talk about the "energy self-sufficiency" of the United States and that, if necessary, the States can always fill the market with "cheap American shale oil," belong to the PR sphere, but not reality. The flagship of the American business press the Wall Street Journal explains why:

"The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money. Frequent infusions of Wall Street capital have sustained the U.S. shale boom. But that largess is running out."

It is not only the generosity of American financiers who don't really want to invest in unprofitable "oil shale." The historical period in which the United States could unilaterally dictate its will to the whole world it is coming to an end. The White House will have to learn the forgotten art of negotiation again. Only now it will be quite difficult to find those who are willing to negotiate with Washington.

Author: USA Really