Former president Donald Trump has loudly demanded the Biden administration take extreme action to prevent U.S. oil prices from rising. Otherwise, he cautioned, we would be leaving a gap for the enemy to exploit. His comments come as crude oil prices have been wildly volatile. These changes are the result of acute geopolitical tensions combined with longer-term changes in market dynamics.
On the last trading day, U.S. crude oil prices fell 75 cents. This 1.02% decrease lowered the price to $73.09 per barrel. Brent crude saw an even bigger jump, gaining more than 5% on the evening of Sunday and briefly topping $81. It dropped back down later in the week after this spike. In recent weeks, despite these developments, West Texas Intermediate (WTI) hit the highest levels since January before retreating.
Hosting a roundtable on the economy near the end of last month, Trump reiterated the need to keep oil prices down. He stated, “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!” Global tensions have escalated further since the recent U.S. cruise missile strikes destroyed or severely damaged Iran’s most important nuclear installation. Until then, we can only worry about retaliatory efforts to disrupt energy supplies throughout the Middle East.
This means that in the United States, the decision to produce oil comes mostly from private companies that are responsive to market conditions. Earlier this year, several oil majors foreshadowed the need or prospect for production cuts. They took this action due to falling prices which had reached a multiyear low. Many of these lows were due to the impacts of Trump’s tariffs and OPEC+’s choice to increase supply.
The oil market has remained surprisingly firm given the precarious state of the Middle East. Surprisingly, Trump’s recent comments and the recent U.S. attacks on Iranian facilities don’t seem to have shaken it much. On this, analysts say that what Trump is calling them to do resonates deeply with a lot of people in the industry. They caution against stifling market dynamics, which they say should drive production decisions more than political pressure.