Trump goes 'America First' on Opec, but his policy faces limitations
US President's attacks on oil giants leaves trail of bewildered Gulf diplomats
It’s no secret that President Donald Trump is not a fan of The Organization of the Petroleum Exporting Countries (OPEC).
As president he has made more direct attacks on the organisation than any of his predecessors in a string of attempts to stabilise the oil market and push Saudi Arabia to increase its capacity.
On Sunday Mr Trump accused OPEC on Fox News of manipulating the prices and warned its members to “stop it because we’re protecting those countries, many of those countries.”
The warning followed a barrage of more than 60 tweets over the past seven years in which Mr Trump blasted the organisation.
On Saturday he tweeted: “Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference...Prices to high! He has agreed!”
Saudi Arabia agreed on Tuesday to make use of its spare production capacity to deal with changes in the level of supply and demand. Yet Mr Trump’s attacks have left a trail of bewildered Gulf diplomats.
“The United States knows we cannot just snap our fingers and increase production to 2,000,000 barrels,” One GCC diplomat told The National.
But Saudi Arabia, reports Bloomberg, already boosted its output by 330,000 barrels a day in June to 10.3 million a day, the highest since 2013. Mr Trump's rhetoric may well be shaped by the upcoming midterm elections in November and the spike in US gasoline prices.
Ellen Wald, an energy expert and President of Transversal Consulting told The National that Mr Trump “is clearly concerned about gasoline prices rising too much in the US and that the administration's policy towards Iran - which could remove up to 2.5 million barrels per day from the market - will cause oil and gasoline prices to spike.”
“This is especially concerning as mid-term elections will be around the same time as the sanctions are reinstated in November.”
Oil sanctions on Iran are expected to resume on November 4, two days ahead of congressional midterms.
Ms Wald said Riyadh will increase production “but by how much is not clear and will be determined by how much the Saudis think they can sell.”
Another sticking point between US and the Kingdom is Riyadh’s increased coordination with Russia in the energy sector. “Saudi Arabia will also coordinate with Russia because maintaining the Saudi-Russian cooperation is key to Saudi Arabia's long-term oil strategy...this may not be what President Trump was looking for,” said Ms Wald.
US Secretary of State Mike Pompeo met with Saudi energy minister Khalid Al Faleh in Washington on Friday. Mr Al Faleh has had an instrumental role in improving cooperation with Russia, where he last visited in May.
Mr Trump is not the first US President to attack OPEC. The organisation has been a punching bag for US politicians since 1973. His attacks, however, are more frequent and ruthless in language than those of his predecessors.
Karen Young, a Senior Resident Scholar at the Arab Gulf States Institute in Washington told The National that Mr Trump’s “efforts at petro-diplomacy demonstrate his America First rhetoric but his agenda may hit snags when it comes to economic cooperation.”
She warned that the handling of any economic or oil crisis will “require diplomacy, delicate partnerships and technical knowledge.” Something that is lacking in Mr Trump’s rhetoric, she said.
Unsurprisingly, Mr Trump’s Twitter demands for increase in oil production and threats to OPEC “do not automatically create the pricing changes that he sought," said Ms Young.
"Instead it reveals the economic interdependence of his Iran policy, his Middle East partnership strategies, and his vulnerability in the domestic economy” Ms Young said.
Updated: July 4, 2018 07:07 AM