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RedState's WaterCooler! Tuesday, 3/21/2017 - Open Thread (Evening Edition) - Why might Trump rethink Make America Oil Independent?

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Trump’s Oil Gamble

In a highly unusual move, OPEC (Organization of the Petroleum Export Countries) and non-OPEC Russia have stepped down production of crude to decrease stockpiles and normalize prices above $50/barrel by June 2017. One major glitch in OPEC‘s plan is current US policy. Obama-era increases of our US stockpile after a more than two-year low is nullifying the project’s marginal return.

To further infuriate Saudi Arabia – OPEC’s de facto leader – and Russia is if the US stays on track without any influence by the Trump administration to adjust current policy, America will likely be energy independent in 10 years.

However, Trump has already significantly influenced future US production flows by opening up the Keystone XL pipeline, for one. If his future initiatives pan out, the US goal may come sooner, but at a potentially steep cost to countries whose economies are dependent on their own exports. Russia being one of the biggest losers to Trump’s energy plan. OPEC has a legitimate cause for concern.

Three events last week may indicate President Trump is rethinking his promise, at least in the short-term: a March 14th meeting with Saudi Arabia; another delay in unveiling Trump’s America First Energy Plan; and Secretary of State Rex Tillerson unscheduling a NATO meeting for a trip to Moscow.

A week ago, President Trump met with Saudi Deputy Crown Prince Mohammed bin Salman to discuss among other things, “energy fields.” Given the US is in its ninth week of drilling expansion and that OPEC has yet to reach its $50/barrel goal, oil was likely a core debate. Also, mere hours following the meeting by the two leaders, February’s OPEC Monthly Oil Market Report was released revealing Saudi Arabia had reneged on its bargain by slightly increasing production. Although par for the course for other OPEC member-states to break oil production agreements, SA has rarely done so possibly demonstrating SA is unhappy with an unexpected US crude windfall.

According to the administration’s “An America First Energy Plan,” President Trump has no problem stepping on OPEC toes to make America “completely energy independent.”

President Trump is committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests.

While simultaneously making our “Gulf allies” happy.

At the same time, we will work with our Gulf allies to develop a positive energy relationship as part of our anti-terrorism strategy.

It’s not clear how President Trump will completely divest the US from OPEC, led by Saudi Arabia our long-time Gulf ally, yet sustain an “energy relationship” with the member-states.

If Trump’s full plan is to use US oil stockpile capability and export as a bargaining chip to obligate oil rich countries to give their fair share in the war on terror, the US may need to reduce crude production to get them to the table. Otherwise, we’re in an oil war with SA and Russia that may not be in America’s best interest.

The administration had promised on Friday Trump would reveal and sign the “Energy Independence” executive order yesterday, but it was removed from his schedule with no new date set.

Yesterday Secretary of State Tillerson made an unexpected change to his schedule which may indicate Trump is wavering on complete US disengagement from foreign oil. Within days of Trump’s meeting with the Saudi Prince, the Secretary of State nixed a planned NATO meeting in favor of Moscow. Russia initiated an agreement with OPEC because their economy is flailing and boosting oil prices could help avert further decline.

So, Trump’s beloved Russia is and will continue to be economically damaged by increased US oil production thereby further reducing fuel prices offsetting any gain by its OPEC deal. If OPEC’s plan was dependent on relatively unfluctuating US production, Obama’s energy policies apparently hurt Russia.

What quid pro quo, if any, did Saudi Arabia agree? Why was Trump’s highly anticipated energy plan delayed again? Why did Tillerson choose Moscow over a planned NATO visit?

 


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