Why Trump Is So Worried About Low Oil Prices—And Why He Should Be – By Justin Worland (TIME) / April 6 2020
For years, President Trump has touted low oil prices as a win for American consumers and used his position to try to keep them that way. “Good for the consumer, gasoline prices coming down!” he tweeted on March 9.
But as the new coronavirus has brought much of the world economy to a halt, it has also helped trigger a collapse of oil prices that has forced Trump to reverse course and try to raise prices. In recent days, he has threatened to impose tariffs on oil imports, called the leaders of Saudi Arabia and Russia to persuade them to cut production and pushed his administration to find ways to buy oil itself.
The question now is how far Trump is willing to go to fight back. On Friday, he brought top U.S. oil and gas executives to the White House for a closed-door meeting with senior members of the administration and a handful of Republican senators. “We’re going to take care of our energy business,” he said at the White House on Saturday. But intervention is risky. Helping some in the domestic oil industry could hurt others, and cost jobs among the losers. Fighting back abroad could fracture old alliances and spread unrest in the Middle East. And any action by the White House could have knock-on effects for the fight against climate change.
The current industry tumult is the result of two things: reduced demand thanks to the coronavirus-driven decline in economic activity and increased supply from a price war between Russia and Saudi Arabia. The reduced demand is simple to understand: factories are idle, airlines are flying less and people are staying at home. More complicated is the supply glut: talks between OPEC+ members, a cartel of countries that control much of the world’s oil production, fell apart Mar. 6 as Russia and Saudi Arabia failed to agree on a pact to reduce production. Instead, the two countries, the world’s second and third largest producers of oil, announced that they would ramp up production, further driving down the price.
Having supply and demand shocks hit the oil market at once is rare, and challenging. “For the first time in decades, we are seeing both of them,” said Fatih Birol, the head of the International Energy Agency at an online Atlantic Council event on Mar. 26. “This will have, I’m sure, significant consequences for the next years to come.”
Continue to article: https://time.com/5815152/oil-prices-coronavirus/
