Dec. 03–President Trump’s ongoing political pressure on Saudi Arabia and other foreign nations to keep oil prices low is harming the U.S. energy sector and the Texas economy, according to a new report by the Morningstar investment firm.
Oil prices have cratered since early October because of soaring output from the world’s top producers, especially the U.S., but Trump has argued in favor of keeping oil prices low in order to generate cheaper gasoline costs. He’s said that the Saudis, other OPEC nations and Russia should resist cutting production — as they’re discussing — to push crude oil prices lower.
The Organization of the Petroleum Exporting Countries meets this week in part to consider production cutbacks.
“The current administration’s policy of rejecting any OPEC move to cut production is driven by short-term pursuit of headlines,” said Sandy Fielden, Morningstar’s director of oil and products research. “The longer-term consequences for the U.S. oil industry of pushing Saudi Arabia to reject production restraint will be felt directly in states such as Texas and North Dakota.”
Because the U.S. now produces more oil than gasoline, Fielden estimates that the U.S. economy will suffer more from falling oil prices, offsetting the gains made from consumer savings at the gas pump. Energy companies suffer, many thousands of people lose their jobs and the economies of states like Texas suffer.
“Trump has criticized any attempt at oil price support from Saudi Arabia, further weakening prices in the run up to the OPEC meeting this week,” Fielden stated.
“Reduced drilling has a direct impact on employment and economic activity in the oil industry as well as a host of ancillary activities,” he said. “Since the start of the oil shale boom these industries have been major engines of economic growth in Texas, North Dakota, Oklahoma, Colorado and Wyoming.”
Falling crude production also slows the path to energy independence often touted by the Trump administration, Fielden added.
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