“I would use tariffs, if I had to. I don’t think I’m going to have to,” U.S. President Trump told media on Sunday as quoted by CNBC, in response to questions regarding his next moves in propping up devastatingly low oil prices.
Trump has been consistent over the last week or so in his belief that despite difficulties, Saudi Arabia and Russia will reach a deal to reduce production. He has given no indication, however, that the United States is willing to take part in this production control effort, which may compromise its success.
At the same time, Trump’s position reflects the position of many U.S. shale producers: last week industry sources told the Financial Times that companies had launched a lobbying offensive with the White House to use any means necessary to force Russia and Saudi Arabia to cut production, including more sanctions on Russia and import tariffs on Saudi oil.
U.S. shale producers were among the hardest-hit players in the industry when Saudi Arabia launched its game of chicken with Russia announcing it would increase oil supply to 12.3 million bpd this month, boosting its production capacity to 13 million bpd. Yet now both Riyadh and Moscow seem to be reconsidering.
Riyadh has called on Western European oil producers to join this week’s OPEC+ meeting to discuss prices while Russia, according to a Bloomberg report, may be willing to cut close to a tenth of its March oil production, which stood at 11.3 million bpd, but only if the U.S. agrees to make its producers cut, too.
Trump has signalled he would prefer “the free market” to have the last word but it seems the free market could use some help. To be fair, Trump noted he did not expect it to come to tariffs.
“It’s obviously very bad for them,” Trump told media referring to the effect of low oil prices on Saudi Arabia and Russia. This, the U.S. president believes, will ultimately push the two to an agreement, which would benefit all producers.
By Irina Slav for Oilprice.com
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