President Donald Trump thanked Saudi Arabia for lower oil prices one day after announcing the U.S. won’t let the murder of a journalist jeopardize relations with the kingdom.
“Oil prices getting lower. Great!” Trump said on Twitter Wednesday. “Thank you to Saudi Arabia, but let’s go lower!”
Yet the gyration in oil prices Trump cited has multiple causes.
The global benchmark for crude surged to a four-year high in early October amid concerns about the tightened embargo on Iran oil exports the Trump administration had said it would impose in early November, with the backing of Saudi Arabia.
Oil prices have declined more than 20 percent since then, driven by worries about worldwide economic growth during a global stock selloff and escalating trade tensions as well as doubts about OPEC’s commitment to restraining supplies.
The Saudis boosted oil output this month, responding to demands from clients preparing for disruptions in Iranian supplies, according to industry executives. It’s unclear, though, if Riyadh plans to sustain that production, with OPEC and its allies set to meet in Vienna in early December to discuss their plans.
Trump said on Tuesday that he won’t let the murder of journalist Jamal Khashoggi jeopardize U.S. relations with the Saudis because oil prices may rise if the partnership between the two nations breaks.
In an unconventional statement headlined “America First!” Trump said he would stand by Saudi Arabia regardless of whether Crown Prince Mohammed bin Salman ordered Khashoggi’s death. The kingdom’s strategic importance, he argued, outweighs the “horrible crime” perpetrated against Khashoggi, a U.S. resident who was a writer for the Washington Post and a critic of the crown prince.
“If we broke with them, I think your oil prices would go through the roof,” Trump told reporters later Tuesday as he left the White House to spend Thanksgiving in Florida. He added that given the U.S. interests at stake, “It’s a very simple equation for me.”
That statement drew backlash from lawmakers in both parties who have criticized Khashoggi’s murder and the crown prince’s alleged role.
“While Saudi Arabia is a strategic ally, the behavior of the crown prince — in multiple ways — has shown disrespect for the relationship and made him, in my view, beyond toxic,” Republican Senator Lindsey Graham said. He added, “when we lose our moral voice, we lose our strongest asset.”
Neil Dutta, an economist at Renaissance Macro Research, said in a note to clients Wednesday that Trump was wrong in ascribing the benefits of a drop in oil prices to the U.S. economy since the nation now produces more oil. Disposable income will see a lift but Dutta said he expects mining investment to cut growth in the first half.
“This represents a shift of income from oil producers to oil consumers in the global economy,” he said. “For the U.S., I’d argue that a drop in oil prices is still a small positive, but the more relevant story these days is the shift of income between sectors of the economy.”