The Trump Effect
President Trump has done some good things for the oil industry, but he has a blind spot when it comes to oil prices. He has been vocal about the need to keep oil prices low, even as the U.S. becomes an increasingly important global oil producer.
This would have been an understandable position a dozen years ago, when net imports had reached 14 million barrels per day (BPD). But today, with net imports of crude oil and finished products transitioning into net exports, it’s becoming a different ballgame.
Low oil prices are a threat to the dream of U.S. energy independence, as they reduce the incentive to invest in new oil production. Low oil prices are also a threat to renewable fuels like ethanol, which become less competitive in a low oil price environment.
Most of the states that benefit from high oil prices are states that voted for President Trump: Texas, Oklahoma, North Dakota, Iowa, Pennsylvania. There are a handful of exceptions, such as California and Colorado, but the oil states are mostly Trump country.
However, President Trump has taken actions that have hurt U.S. oil producers.
Why Oil Prices Fell in 2018
This past summer, China had become a major importer of U.S. oil to the tune of 500,000 BPD. But the trade war with China resulted in China halting imports of U.S. oil. This loss of market hurt U.S. oil producers, and helped push inventories higher in the U.S. This further hurt U.S. oil producers by pushing prices down.