Rising OPEC Oil Prices have been criticized by Donald Trump as being “too high.” In fact President Trump has stated that the OPEC prices are artificially high in a tirade aimed at OPEC and the EU. His comments included the terms “no good” and he stated that they would not be accepted!
OPEC Responsible for Rising Oil Prices
Oil prices have been rising over the past few months, and hit their highest price for 3.5 years on Thursday. A major reason for this, but the only one, is that OPEC has been depressing oil production in an attempt to drive prices up.
This policy started at the beginning of last year, and is set to end at the end of this year. However, this is not yet certain, and OPEC’s June meeting might extend the policy should it seem necessary. President Trump tweeted that prices are artificially high, and that it is “No good and will not be accepted.” What he intends to do about it, and in fact what he is able to do about it is not yet clear.
Rising OPEC Oil Prices – Artificially High
He has stated basically that with high quantities of oil in stock and at sea, then oil price should drop, not rise. He is likely right this time, and that OPEC countries are maintaining artificially high prices to increase their own income.
After Trump’s comment Brent crude and West Texas Intermediate (WTI or Texas light sweet) both dropped about 1%. Part of this issue is US shale oil production that has not only increased the supply of global oil supplies but also at a relatively low price. This began in 2016 and led to oil prices dropping below $30 a barrel.
OPEC Supply Restrictions Lead to Rising OPEC Oil Prices
Supply restrictions applied by OPEC and Russia (not an OPEC producer) were effective in driving prices upwards. Rising oil prices saw Brent crude reaching the dizzy height of $75 a barrel in the week past. It became apparent that the US was not the global oil power it once was, and that OPEC and Russia were able to maintain prices at a level that suited them.
It is unlikely that the US can significantly get oil prices lower. Sure, the barrel price dropped 2% after Trump’s new tariffs on China. This was on the belief that a serious trade war between these two superpowers could affect world trade and global growth. Energy ministers from the OPEC members, United Arab Emirates and Iraq, rejected the opinion that prices are too high.