The US isn’t a member of OPEC, a cartel that’s anathema to the free-market capitalism of the world’s biggest economy. Yet presidents have long pressured its top producer Saudi Arabia to adjust oil production policies, usually to lower gasoline prices. US President Donald Trump has abandoned quiet leverage for loud protest, tweeting last month: “Oil prices are too high. OPEC is at it again. Not good!”
What does Trump want from OPEC?
Lower gasoline prices as Americans head into the summer driving season. Average pump prices in the US are up 13 per cent this year, rising above $3 a gallon in April for the first time since 2014. He has tweeted about the Organization of Petroleum Exporting Countries at least 63 times since 2011, repeatedly saying the group is “ripping us off” and that crude should cost no more than $25 a barrel. US oil closed Friday at $74.15 a barrel.
His most recent shot came on Saturday when Trump said Saudi Arabia’s King Salman agreed to boost output by as much as 2 million barrels a day to make up for lower production in Venezuela and potential disruptions in Iranian supplies. While the White House later backed away from an agreement, the tweet came after oil and gasoline prices surged last week even after Saudi Arabia convinced OPEC to potentially add nearly 1 million barrels a day to the market. US oil prices jumped 8 per cent last week.
Have other US presidents tried to influence OPEC?
OPEC has been a punching bag for US politicians since the 1970’s, when the group had far more power over oil prices than it does today. Republican presidents, especially George H.W. Bush and his son, used diplomatic channels with Saudi Arabia, the world’s biggest exporter which pumps almost one-third of OPEC’s output. Prior to Trump’s public berating, Bill Richardson, the energy secretary during the second administration of Bill Clinton, phoned the Saudi oil minister in the middle of an OPEC meeting in 2000 asking for a production increase, enraging other members of the cartel and exacerbating a schism between Saudi Arabia and Iran.
How is Trump different?
President Trump has been a vocal critic of OPEC for decades, first in his books and then via Twitter. He has gone further than other presidents in commenting on specific oil prices and production levels, and has mused about “how much money the average American would save if we busted the OPEC cartel.” This track record is important because US lawmakers have resurrected the “No Oil Producing and Exporting Cartels Act," or NOPEC, which could make the group subject to the Sherman antitrust law, used more than a century ago to break up the oil empire of John Rockefeller. US politicians haven’t succeeded in passing the NOPEC bill despite several attempts since 2000.
Can Saudi Arabia make up for OPEC’s losses?
Many OPEC members have been struggling to keep their production up. Venezuela’s oil industry is in shambles and conflict in Libya has caused large swings in supplies. Trump’s administration in early May said that it would renew US sanctions on Iran and has sought to reduce other foreign buyers’ purchases of Iranian oil. Saudi Arabia has the largest spare capacity of about 2 million barrels, which would be stretched to the limit if the kingdom would have to make up for lost supplies. Bringing all those barrels to market could take up to a year, and render OPEC agreements irrelevant.
How are OPEC members reacting to Trump’s intervention?
There has been little public reaction so far, though some producers may be irked by Trump’s request which would alter in effect an OPEC decision. Iran Oil Minister Bijan Namdar Zanganeh said any production increase above limits agreed to by OPEC would “breach” the deal, according to a letter he sent to OPEC President Suhail Al Mazrouei. OPEC should reject the US call for a production increase which is “politically motivated against Iran,” he said.