American motorists love to hit the road. They vaguely take note of gasoline price ups and downs but drive on regardless. Many drivers, though, have noticed that the price swings have been more up than down recently. President Trump and Saudi Arabia are at odds over oil, triggering the sharp increase in gasoline prices.
President Trump and Saudi Arabia are feuding over the supply chain of oil to U.S. shores. As a result, sanctions against Iran have chilled the relationship between Iran and the West.
What is the result? This week the price of oil reached highs that have not been seen in at least four years. In fact, a barrel of sweet, crude hit $86 per barrel toward the end of last week.
President Trump has put pressure on both OPEC and the Saudis to increase the production of oil and lower prices. From his perspective, oil price increases are caused by his newest sanctions levied against Iran which the Saudis fully support. Therefore, (states the President) Saudi Arabia ought to deploy additional oil reserves to ensure American drivers a less painful fill-up.
Saudi Arabia has attempted to reassure the international market that they will increase production if the market runs short but, they say the current market is well supplied. At this point, they believe an increase in exported oil is not warranted.
President Trump didn’t want to hear that, so he turned up his verbal firepower this week at a campaign stop in Mississippi. He delivered a low-level threat to Saudi Arabia’s King Salman when he said the following:
“We protect Saudi Arabia. Would you say they’re rich? I love King Salman, but I said ‘King, we’re protecting you. You might not be there for two weeks without us. You have to pay for your military.”
Crown Prince Mohammad bin Salman responded quickly to President Trump’s charges when he spoke Saturday afternoon.
“The request that America made to Saudi Arabia and other OPEC countries is to be sure that if there is any loss of supply from Iran, that we will supply that. And that happened…So we export as much as 2 barrels for any barrel that disappeared from Iran recently. So we did our job and more. We believe the higher price that we have in the last month, it’s not because of Iran. It’s mostly because of things happening in Canada, and Mexico, Libya, Venezuela and other countries that moved the price a little bit higher.”
What is the bottom line? The Administration heard Saudi Arabia and now knows that help is NOT on the way. Perhaps more oil could come to the international market from elsewhere. There are known reserves in the Saudi Arabia/Kuwait neutral zone, Canada, the United States, Kazakhstan, Iraq, Libya, Azerbaijan, and Nigeria. But those sources would require varying amounts of both time and money. The Saudis could hit the market tomorrow with up to a half billion barrels of new oil.
They won’t. The next move is President Trump’s.