President Trump has been signing numerous executive orders since his inauguration on January 20, with a notable focus on energy policy. One significant action includes declaring a national energy emergency, which has profound implications for both the U.S. and global energy sectors. This declaration has led to:
- New LNG terminal approvals and an increase in Alaskan oil production.
- Revocation of the Biden administration's drilling ban in most U.S. coastal waters.
- Withdrawal of the U.S. from the Paris Climate Agreement for the second time under Trump's presidency.
Regarding international oil prices, President Trump has called upon Saudi Arabia and OPEC to lower oil prices, echoing a previous unsuccessful attempt by President Biden. Biden's approach included a direct appeal during a visit to Saudi Arabia, but this did not lead to increased production. In response to Saudi Arabia's refusal, Biden withdrew U.S. anti-missile defense systems, known as Patriotic Batteries, although Saudi Arabia later managed to borrow these from Greece.
When Biden's diplomatic efforts failed, he resorted to releasing oil from the Strategic Petroleum Reserve (SPR), which was at odds with its intended use for emergencies rather than market stabilization. This action indeed lowered oil prices temporarily but left the SPR at historical lows, impacting U.S. energy security; filling them up has been an uphill task due to high oil prices.
The relationship between President Trump and Saudi Crown Prince, Mohammed bin Salman, has been amicable, which might influence OPEC+'s response to Trump's requests for lower oil prices. However, the dynamics could shift if Trump follows through on threats to reduce U.S. military presence in Saudi Arabia; President Trump made thinly-veiled threats against Saudi Arabia on the same issue during his first term in office.
Market analysts speculate that these moves could lead to a short-term oversupply and lower oil prices, but there are potential countervailing forces:
A proposed 25% tariff on Canadian goods, for instance, might disrupt oil imports from Canada, affecting U.S. refineries that rely on Canadian crude due to close proximity to Canadian oil sources.
President Trump's threats of new sanctions on Russia unless peace talks in Ukraine are initiated could tighten global oil supplies, if Russia's oil exports are curtailed. His plans to target Iran's shadow oil fleet might further constrict supply, pushing prices up.
Thus, while President Trump's strategy appears aimed at lowering oil prices, the complexity of global oil markets, geopolitical tensions, and domestic policy decisions could lead to fluctuating oil prices. The exact outcome depends on how these various international and domestic factors interact.
A proposed 25% tariff on Canadian goods, for instance, might disrupt oil imports from Canada, affecting U.S. refineries that rely on Canadian crude due to close proximity to Canadian oil sources.
President Trump's threats of new sanctions on Russia unless peace talks in Ukraine are initiated could tighten global oil supplies, if Russia's oil exports are curtailed. His plans to target Iran's shadow oil fleet might further constrict supply, pushing prices up.
Thus, while President Trump's strategy appears aimed at lowering oil prices, the complexity of global oil markets, geopolitical tensions, and domestic policy decisions could lead to fluctuating oil prices. The exact outcome depends on how these various international and domestic factors interact.
