While President Trump overemphasizes U.S.-Saudi economic ties, maintaining this alliance is crucial to U.S. interests. But what of Trump’s claim on Wednesday that he is responsible for lowering crude oil prices?
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!
— Donald J. Trump (@realDonaldTrump) November 21, 2018
Trump has had a role in lowering oil prices, but other important factors are also in play.
Crediting Trump, it’s clear that the president’s relationship with the Saudis has enabled him to persuade Riyadh to maintain high oil output levels and thus insulate global oil markets from upward price volatility. Trump’s close relationship with the Saudi royal family includes strong relationships between Secretary of State Mike Pompeo and Crown Prince Mohammed bin Salman, and Defense Secretary Jim Mattis and the Saudi foreign minister, Adel al-Jubeir. And I sincerely doubt the Saudis would have been as amenable to Trump’s output pressure had he not been so resolute in defense of their interests.
As critical here, however, is the fact that the Saudis have been able to align other OPEC high-production nations such as the United Arab Emirates and Kuwait behind their output-boost strategy.
Yet lower oil prices aren’t all about Trump.
The downward trend of recent months also reflects a decision by other non-OPEC producers such as Russia to maintain comparatively high oil output levels in order to offset fears that higher prices might jeopardize global economic growth. At around $54 per barrel, crude prices are still higher than in much of the January 2015-January 2018 period, which saw drops to as low as $28 per barrel. Russia will accept the current price level in that it allows a balancing of global economic interests (which Russia needs greatly in the context of sanctions on Putin’s regime), and just about enough oil-based revenue to pay the Kremlin’s bills. Equally important here, oil producers fear that any effort to gouge the market might precipitate a global economic decline and a demand collapse.
So yes, put simply, Trump deserves some credit for low oil prices. But not all the credit.
