President Trump

Coronavirus crisis tests Trump’s love for cheap oil

President Trump is working to help an oil industry imploding as the coronavirus crisis chokes demand, but listen closely and you’ll hear his enduring love for cheap prices.

Why it matters: He’s like most Americans, who worry about energy only when it’s expensive or gone. As president, Trump has been slow and uneven in responding to the sector’s turmoil because of his inclination to cheer rock-bottom prices.

The big picture: Trump often says — wrongly — that the oil industry was doing great before the pandemic. Companies have been producing more oil and gas than ever, which empowered Trump’s tagline of “energy dominance.” But all of that supply is actually a core reason many were already struggling before the coronavirus hit.

How it works: Here’s a representative timeline of Trump’s evolving comments on oil over the past month.

  • On March 9, right at the beginning of the cascading shutdowns across the country, Trump tweeted that it was good for consumers that gasoline prices were going down.
  • On March 12, Trump told reporters about oil prices dropping, per Bloomberg: “Frankly that’s like a big tax cut, not a little tax cut for the consumer. So there’s something about that that I like.”
  • On March 19, Trump said for the first time that he would, at the “appropriate time,” get involved in a price war between mega-producers Saudi Arabia and Russia. That price war began March 6, almost two weeks prior.
  • By March 26, Trump administration officials had ramped up their diplomatic overtures to Saudi Arabia.
  • On March 30, Trump surprised even himself. “I never thought I would be saying this: Maybe we have to have an oil increase,” Trump said in a Fox News interview. “Because we do. The price is so low now. We don’t want to have an industry that’s wiped out.”
  • Trump tweeted Thursday that he called the leaders of Saudi Arabia and Russia, fully engaging himself in the saga, at least for the moment.
  • On Friday, Trump again emphasized cheap prices and indicated a reluctance to take major action. He suggested his administration find even more places to store excess oil than the nation’s strategic reserves. “At these prices, you should do it,” Trump said. “Fill it up, right?”

The intrigue: “Up until recently, he has had very little sympathy for oil companies,” said one person familiar with Trump’s thinking who requested anonymity to talk candidly about the president’s sentiment. “He approaches this issue as a true populist, up until this crisis.”

Reality check: Storing more oil and most other options Trump has at his disposal are limited, and the industry is divided on what the government should do. Turmoil, both in the short and long term, is all but guaranteed for the embroiled sector.

In the short term, expect bankruptcies and layoffs.

  • The industry and related sectors account for about 2.5 million jobs, according to IHS Markit, a consultancy.
  • Oil prices persisting in the range of $30 a barrel could prompt 150–200 Chapter 11 filings in the sector through 2021, according to research published Friday by consultancy Rystad Energy. If prices fall closer to $20 a barrel, that number could rise to 400.

In the long term, experts are warning that oil prices — and therefore gasoline prices — will rise more in the coming years than they would have absent the pandemic due to how classic boom and bust cycles work.

  • The demand cutoff — roughly a quarter of the nearly 100 million barrels a day that are consumed now — will eventually prompt the industry to curtail production so much that in a few years’ time the world could be in a supply crunch, not a demand crunch.
  • “Paradoxically, this [demand cutoff] will ultimately create an inflationary oil supply shock of historic proportions because so much oil production will be forced to be shut-in,” Goldman Sachs wrote in a note last week.
  • “Unless there’s some structural break when we emerge, a thirstier world is going to run into larger shortages,” and oil prices will go through the roof, said Bob McNally, founder of consultancy Rapidan Energy.
  • The firm forecasts that oil prices could breach the $100-per-barrel mark by the mid-2020s — light-years from now in our current time frames. That could mean $4 per gallon gasoline.

Yes, but: Despite tanking stocks and oil prices, the oil and gas industry is enjoying a record high positive reception from the public, according to Gallup data going back to 2001.

  • For the first time since Gallup began asking the question, the industry received a net positive rating in August 2019, with 39% of respondents rating the sector positive and 36% rating it negative.
  • The probable reason why is the same reason Trump likes the sector: low gasoline prices.

The bottom line: The irony, of course, is that right now, most of us can’t take advantage of these rock-bottom prices as we’re locked down. When we can drive and fly again like normal, prices are poised to rise.

YOU MIGHT LIKE
Categories
President Trump

Leave a Reply

  • Fallen Capitol Police Officer’s Mother Says Media Is Lying February 23, 2021
    The mother of Brian Sicknick, the Capitol Police who died in the January 6 Capitol riot, is speaking publicly about the media's false reports following her son's tragic death. In an interview with the Daily Mail, Gladys Sicknick, 74, said she believes her son suffered a stroke during the riot, despite media claims that he […]
  • Seattle Pays $10,000 to a Communist Activist February 23, 2021
    The city of Seattle agreed to pay $10,000 to settle a lawsuit last week. Brought to federal court by a woman named Ada Yaeger, the suit is in regards to the city's plan to remove her tent from Cal Anderson Park last December as part of clearing out a new 'autonomous zone.' Local news outlets […]
  • Biden Administration Cuts Power of ICE by 80% February 22, 2021
    According to a Washington Post report, President Joe Biden’s deputies have taken away the ability of ICE officers to safeguard 300 million Americans from illegal migrants. The report outlines a memo that imposes reduced enforcement priorities for the nation’s Immigration and Customs Enforcement (ICE) officers. The 90-day rules will block roughly 80 percent of deportations, […]
  • Iranian Terrorists Attack U.S. Forces, Biden Responds by Pursuing Iran Nuclear Deal February 19, 2021
    Former U.S. officials and national security experts are criticizing President Joe Biden after his administration announced they will re-enter talks with Iran to pursue a nuclear deal. Ned Price, State Department spokesman, said that the Biden administration would “accept an invitation from the European Union High Representative to attend a meeting of the P5+1 and […]
  • U.S. Officials Forced to Take Vaccines from Russia February 19, 2021
    U.S. officials serving abroad in nations with low-grade medical capabilities are being forced to get COVID-19 vaccines from foreign governments, including Russia, due to a lack of supply from the Biden administration. As the Washington Post reported, “At least 13 foreign governments offered to inoculate U.S. officials serving abroad with their own supplies of U.S.-made […]
  • Biden: “Everyone Knows I Love Kids Better Than People” February 19, 2021
    President Joe Biden is receiving backlash after saying "I love kids better than people," at CNN's town hall event. “Signing off with a final notable quote from Joe Biden during his town hall this evening: ‘Everyone knows I love kids better than people,'” wrote Kayleigh McEnany, former White House press secretary for President Donald Trump. […]
  • Los Angeles School District Cuts One Third of Police Officers February 18, 2021
    The school board of the Los Angeles Unified School District, California’s largest public school system, voted Tuesday to cut a third of police officer positions and decrease the powers of remaining officers. The district approved a plan to eliminate 133 police officer positions. The school board also banned police from using pepper spray on students […]
  • Is Dwayne ‘The Rock’ Johnson Running for President? February 17, 2021
    Wrestler and actor Dwayne "The Rock" Johnson is thinking about a potential run for the White House. In an interview with USA Today about his new sitcom “Young Rock,” The Rock talked about the comments he made in 2017 on The Ellen DeGeneres Show that he may run for President. “I would consider a presidential […]
  • The U.S. is Losing the Border under Biden’s New Rules February 16, 2021
    Former ICE Director Tom Homan told Fox News host Mike Emanuel that the Biden administration's strategy to open borders is resulting in a huge surge of border crossing. "And you know, so this isn't by accident," Homan said. "This is by design. This is an open border strategy. [Biden] has bowed to the left, we […]
  • Trump Acquitted, focused on 2022 February 15, 2021
    President Trump has been acquitted in the Senate trial that closed today by a vote of 43 not guilty, 57 guilty. A 2/3 majority was required and not achieved. Sens Romney, Murkowski, Collins, Burr, Sasse, Toomey and Cassidy, were the Republicans who voted to convict President Trump. The House impeachment managers presented their case that […]