For those who want to see what a real case of Russian collusion looks like, check out what has been happening in global oil markets for the past year and a half.
In late 2016, Russia and Saudi Arabia conspired to cut supply and raise prices. With cooperation from the rest of OPEC, they’ve succeeded spectacularly. Prices that had plummeted below $30 per barrel have been steadily rising in the wake of the Saudi-Russian pact to throttle back production, hovering recently at around $70 a barrel.
It could get worse. On his recent tour of the United States, Saudi Crown Prince Mohammed bin Salman announced that the kingdom’s goal was to extend its scheme to manage prices with Russia for another 10 to 20 years. The Saudi oil minister has suggested that OPEC and the Russians will continue tightening the market even though they’ve already succeeded in drying up a massive glut in global crude inventories. Saudi officials who just a few months ago were speaking of $70 as their target ceiling for prices now suggest that it may instead be the floor. They’ve apparently got their eye on $80, with plenty of talk that a return to $100 might be desirable.
All of this proved too much for U.S. President Donald Trump. As the Saudis were hosting OPEC and the Russians at a meeting this month to admire their market manipulation handiwork, the president let loose a shot across the bow. “Looks like OPEC is at it again,” he tweeted, blasting the cartel for artificially inflating prices. “No good and will not be accepted!”
My gut tells me that the president is on to something. The U.S. oil industry might benefit from steadily rising prices, but the costs to other important U.S. interests could be prohibitive. They’re certainly worth considering — as is a strategy for mitigating national vulnerabilities.
Hurting U.S. consumers
Trump’s chief concern was almost certainly the economic impact of higher energy prices on U.S. consumers. Drivers will be paying more for a gallon of gasoline this summer than at any point since 2014. Estimates suggest that on average U.S. households will spend $400 more at the pump in 2018 than just two years ago. That could significantly erode the stimulus effect of Trump’s recent tax cuts and even negate the benefits entirely for low-income households. While there is probably a sweet spot where higher prices bolster the U.S. energy sector without curtailing consumer spending, Trump’s tweet on April 20 clearly suggests that he doesn’t trust the Saudis — and certainly not the Russians — to be reliable stewards of America’s economic health. Rightly so.