Trump and OPEC — it’s all about the mid-term elections

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Trump and OPEC — it’s all about the mid-term elections

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US President Donald Trump tweeted on Thursday morning: “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!”

He appeared to be taking a harsh stance against the oil policy of the Organization of the Petroleum Exporting Countries (OPEC), particularly that of Saudi Arabia. He was also posturing and projecting a powerful image for his Republican Party for the upcoming November elections.

With Trump, every statement has a shade of literalness and a shade of marketing. After all, he made his fortune as a master of marketing high-end real estate, casinos and golf courses. This tweet was both a literal message to Saudi Oil Minister Khalid Al-Falih, and a sales pitch to American voters.

Trump and US consumers are fearful of high oil prices. American families typically own two cars and drive everywhere. According to the US Census Bureau, more than half of the population lives in suburban neighborhoods. Suburban life in America requires a significant amount of driving to get to work, go shopping, take children to school and after-school activities, and socialize.

 

Saudi Arabia’s voice is also the most influential in OPEC, and only the Kingdom has the power to convince the organization to increase production to offset Iranian losses

Ellen R. Wald

 

Americans also enjoy a tradition of road trips, driving distances to visit family, take vacations, and sometimes just to enjoy the “open road.” Moreover, they favor big vehicles that guzzle gasoline. SUVs and pickup trucks are popular once again since oil prices began to drop in 2014. In short, American families use a lot of gasoline, and they notice the price at the gas pump.

On Nov. 6, the US will hold midterm elections that will determine all of the seats in the House of Representative and a third of the seats in the Senate. It is an extremely important date for American politics, and it will determine Trump’s ability to pursue his agenda over the next two years. At the same time, he is pursuing new sanctions against Iran, most of which will take effect just two days before these elections.

The fear is that as the Iran sanctions approach, the price of oil — and thus of gasoline — will rise because of a loss of Iranian oil from the market. Of all the world’s major oil producers — including the US, Russia, Saudi Arabia and Iraq — Saudi Arabia is best positioned to increase production to offset losses from Iran. The Kingdom has more spare capacity than any other country, perhaps about 1.5 million barrels per day.

Saudi Arabia’s voice is also the most influential in OPEC, and only the Kingdom has the power to convince the organization to increase production to offset Iranian losses. On Sept. 23, OPEC members and Russia will meet in Algeria to discuss oil production. Trump wants to convince Al-Falih to push for more oil production from OPEC, and particularly from Saudi Arabia.

Middle Eastern allies of the US, including Saudi Arabia, lobbied Trump heavily to take a tough stance against Iran. He has done that by reinstating sanctions unilaterally. The US is taking sole responsibility for ensuring that sanctions against Iran are accepted globally.

In his tweet, Trump is reminding Saudi Arabia that US policy and action are serving to hamper Iran’s government and help Middle Eastern countries. In his words: “We protect the countries of the Middle East.” Now he expects Saudi Arabia to do its part to ensure that gas prices do not rise. This is the literalness in his tweet.

The marketing part of his tweet is meant to show American voters that he will act powerfully on their behalf. The average price of gasoline in the US is still below $2.85 per gallon. This is high enough to upset the budgets of many American families, but probably not high enough to send Americans into a panic before the elections.

Generally, over the last decade, Americans have been slow to react to gasoline prices until they reach $3 per gallon. At that point, American consumers start to notice and the price of gasoline becomes a major political issue. It is not there yet, but it might rise just as we approach both the Iran sanctions and the US elections.

Trump wanted Americans to wake up Thursday morning and see that he is standing up for them. He may not be worried just yet that Americans are unhappy with their gasoline bills, but his point was to show them that he is looking out for them even before they notice a problem. It is his way of selling himself and the Republicans as the strong party that protects the American economy and people.

 

• Ellen R. Wald, Ph.D. is a historian and author of “Saudi, Inc.” She is the president of Transversal Consulting and also teaches Middle East history and policy at Jacksonville University.

Twitter:  @EnergzdEconomy

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