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Crude Economics
Trump Advisor Wants Petrostates to Jack Up Gas Prices

A top advisor to Donald Trump wants OPEC and Russia to limit their oil production and help jack up oil—and therefore gasoline—prices. The FT reports:

Mr Hamm, a billionaire pioneer of the North American shale boom who has been tipped as a potential energy secretary should Mr Trump win the US presidential election, said Opec and Russia should agree to freeze production when they meet this month to discuss ways to stabilise the market. […]

His comments mark a rare backing from someone advising a US presidential candidate for market intervention by Opec, which is still closely associated in the US with the Arab oil embargoes of the 1970s.

Delegates from the world’s petrostates are meeting at the International Energy Forum in Algiers at the end of the month, and there has been plenty of speculation that they’ll try to agree on a “freeze” deal on the sidelines of the summit that would effectively cap their collective supplies in the hopes of chipping away at the global glut that has depressed crude prices over the past 27 months.

It’s not clear that they’ll be successful, however, as OPEC these days is fractious at best and, let’s not forget, this same group convened in Doha back in April and failed to find common ground. But with Iranian oil production nearing pre-sanctions levels and some positive rhetoric coming out of Tehran, Riyadh, and Moscow, a freeze deal is looking likelier this time around.

That will delight petrostate regimes around the world, whose budgets have been pinched by bargain oil prices and whose leaders are becoming increasingly vocal about their fiscal discomfort. This is probably not, however, a policy move that Trump’s grassroots supporters will go for. There are very few Americans around who think that what the world needs is more Arab and Russian oil billionaires.

There is a group, however, that might welcome this kind of counsel: environmentalists. High gas prices means Americans drive less and consume less. Sadly, Greenpeace is unlikely to draw the appropriate conclusion and support Trump for President, but it’s possible that some of the big U.S. oil companies—who also like high oil prices—might begin to warm to the GOP nominee.

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  • Matt_Thullen

    Ummm, maybe a guy who became a billionaire through fracking wants the other OPEC states to freeze production in order to make U.S. fracking operations more profitable. As has been pointed out many time on TAI, the presence of a large fracklog in the U.S. is going to be a cap on how high prices will rise.

    • Andrew Allison

      Exactly. It’s odd that TAI overlooked both the benefit of higher prices to US producers (one of which recently announced a mega-discovery) and the fact that the USA is the swing producer. A cynic might conclude that persuading the second and third largest producers to cap their revenue might help Make America Great Again [grin]

  • George Gamble

    Can someone please explain to the folks at the American Interest that the US is quickly becoming one of the biggest oil producers in the world and a higher oil price would not be such a bad thing for this country. One of the best things Obama has done is allow our oil to be exported into world markets. Higher oil prices help support tens of thousands of high paying jobs for people who would otherwise be at the bottom of the earnings ladder.

    At the end of the day though, US fracking will keep a cap on high prices regardless of what the OPEC powers want to do. They tried to kill the industry, and American ingenuity fought back to the point that some US frackers can produce oil at prices lower than what the Saudis can. The entire petro industry has been stood on its head and whatever freeze might be agreed to will simply result in the US expanding its market share.

    • mulp

      US oil production is falling because oil prices have crashed. The drilling that is being done is to fulfill lease requirements to produce by a date to lock in the lease. All the wells that began producing in 2014 can taper off to 10% of potential with rework and still lock in the lease for perpetual renewal. Some new fields are cheap to increase production so those are being worked to generate cash flow to service debt to keep the firm in good financial shape with lots of lease ready to work to increase output when the prices rise. For these privately held firms, patience will be rewarded.

      And prices will rise as Alaska continues to decline in output, and North Sea fields, GOM deep water, Brazil.

  • Jacksonian_Libertarian

    Of course he does, American Shale Oil development would boom again, and at OPEC’s and Russia’s expense. It wouldn’t last of course, American developers are sitting on a fracklog as well as expired wells drilled with inferior tech, which could be re-fracked and produce 2 or 3 times more oil than they did the first time around. My guesstimate is that if the price is right, America would increase production by 2 million barrels per day in a year. At which time we could all enjoy watching OPEC and Russia go ballistic on American Shall Oil Producers.

  • FriendlyGoat

    There was a time when a conservative presidential candidate—–or his surrogate—-suggesting Americans should all pay more for energy would rattle his supporters and undercut his populist shtick. But, probably not now because the supporters are just too stupid to sort this out during rest of the noise.

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