The United States has sent mixed messages to OPEC and its allies over the last week about whether they need to do more to raise oil production and hold down prices.
“The OPEC monopoly must get prices down now” President Donald Trump demanded on Twitter on Sept. 20.
We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!
— Donald J. Trump (@realDonaldTrump) September 20, 2018
The president’s tweets have generally been prompted when Brent crude prices have recently risen sharply and are in the $75-80 range.
From the president’s behaviour, it is possible to infer that he doesn’t want prices to rise above $80 per barrel and would prefer them closer to $70 or even below.
The president’s tweets are creating an implicit price target, even if officials have been careful not to specify an explicit one.
So far, the president has been careful to blame “OPEC” and unspecified countries in the “Middle East” for rising oil prices, eschewing identifying individual countries by name.
As a practical matter, Saudi Arabia, the United Arab Emirates and Kuwait are the only OPEC members that have significant volumes of spare capacity and could raise output.
But all three are close allies of the United States, and Saudi Arabia and the United Arab Emirates have been at the forefront pushing for tough sanctions on fellow OPEC member Iran.
The president has so far been careful to avoid embarrassing them by identifying them individually, though his tweets have left no ambiguity about their target.
For the time being, the president may be content to complain on Twitter but do little else, in order to avoid being blamed for the rise in oil prices that is a byproduct of his sanctions policy.
However, if oil prices continue rising and hit $81-82 or even $85, the president’s tweets may become more pointed and the White House could take tougher action to raise the political pressure on Riyadh.
Oil prices are now hovering uncertainly amid dwindling exports from Iran, poor production from other OPEC members and Brazil, decelerating output growth in the United States, and an uncertain consumption outlook.
Into that already complicated mix, the president of the United States is now trying to enforce a political price target of $80 or less.