Why Trump’s plan to raise gasoline prices will not help the coronavirus-damaged economy
President Donald Trump was celebrating his recent deal (with Saudi Arabia, Russia and other oil-producing nations) to prop up oil prices — by reducing oil production — though so far his attempt at rigging the oil markets has been a spectacular failure. One of the few bits of good news from the coronavirus recession is the large drop in U.S. gasoline prices — due to falling oil prices, as demand for oil has collapsed. So why is Trump trying to reverse this trend?
The United States is now largely self-sufficient in oil production. If Trump’s deal finally does raise gasoline prices, this will, in effect, be a financial transfer from American consumers in all 50 states to the oil industry, and the few states where production is concentrated. Internationally, the democracies of Europe and Asia (our allies) are energy importers. This market-rigged oil price increase will burden their economies.
Trump claims the American oil production cuts will come about due to market forces under current conditions. But if market forces don’t cause cuts, the Trump administration is considering using COVID-19 as an excuse to shut down offshore U.S. oil production. And it’s even talking about paying oil companies to not produce oil. Worse yet, if we retain these oil production cuts when the economy recovers, we’ll again be a significant net oil importer, dependent on places like Russia and Saudi Arabia for our economy to function.
As usual with Trump, nothing about this deal is transparent or well-documented. This might seem moot (with the current oil price collapse). But since the current deal isn’t working -Trump might press even further to support oil prices. It’s worth asking — who benefits?
Republican donors benefit from this deal
The American shale oil industry (as a high-cost producer) was particularly damaged by the collapse of oil prices and its own incompetence. Other oil producers (e.g., the Mexican government) had the common sense to hedge oil prices in the market. The shale oil industry gambled on stable (or higher) oil prices. It lost, and now American consumers will pay for their greed. Is Trump’s support for this oil deal related to past or future campaign contributions?
Several primarily Republican states (e.g., Oklahoma, Texas, etc.), heavily dependent on the oil industry, benefit if Trump succeeds. Indeed, senators from these states were so eager for a cartel deal that they threatened to force the United States to withdraw troops and protection from Saudi Arabia if it didn’t cooperate in raising oil prices. (Remember when the GOP believed in free markets and not global cartels?) Is Trump manipulating oil markets to help out states politically important to him?
Russia’s a winner, though no friend to democracy
Russians have hacked our elections, been accused of assassinations in the United Kingdom and Germany, and spreads vicious anti-American lies. Russia, as a petro state, needs to stabilize oil prices, and long term it wants to curb U.S. oil production to reduce American clout in global energy markets.
According to Andrew Weiss, formerly of the U.S. National Security Council, Trump bent over backward to engage with Russian President Vladimir Putin and “has gone out of his way to lionize Putin … in very stark contrast to the constant harping on traditional U.S. allies … as ripping off the U.S. or taking advantage of the pandemic to hurt the U.S.”
Perhaps Putin promised Trump some “favors” (e.g., inventing dirt on Democratic presidential rival Joe Biden, hacking the 2020 election or using Russian social media propaganda to boost the GOP) in exchange for our cooperation in this oil deal?
I could describe additional scenarios, but hopefully I’ve made my point — this deal seems suspicious.
If this sounds paranoid — remember, Trump already tried to use America’s resources to bully the Ukraine into helping his 2020 reelection campaign and the GOP-controlled Senate did nothing to punish him.
Since surviving the Ukraine scandal, Trump has fired the inspector general of the intelligence community who supported the whistleblower on the Ukraine incident, and Attorney General Barr has said that the firing was appropriate because the IG overstepped his authority — by telling Congress what was going on. Barr has even claimed that Trump’s soliciting Ukrainian help (to interfere with America’s elections) wasn’t illegal. One of Trump’s loyalists is now acting director of national intelligence.
If Trump made any shady deals, it might be a while before we find out, if we ever do. Further, any Trump quid pro quo with these participants isn’t likely in writing, but more of a wink and a nod.
Trump claims he’s trying to raise oil prices to save “ hundreds of thousands of energy jobs” in America — but that’s unlikely. First, oil and gas extraction only employs about 160,000 people in America. Further, there’s no evidence of promises by these companies to maintain U.S. employment levels. Despite this OPEC diplomacy, the industry expects layoffs. Also, while raising oil prices might protect jobs in the oil industry, it will likely cause job losses in all other industries that have to pay higher oil prices. The result could easily be a net job loss for America.
Seriously, if you believe Trump is trying to raise oil prices to help out American workers — there’s a bridge in Brooklyn I would like to sell you.
Steven Strauss, the John L. Weinberg/Goldman Sachs & Co. Visiting Professor at Princeton University’s Woodrow Wilson School of Public and International Affairs, is a member of USA TODAY’s Board of Contributors. Follow him on Twitter: @Steven_Strauss and/or signup to receive future OpEds at https://tinyletter.com/SSStrauss
Originally published at https://www.usatoday.com.