The coronavirus pandemic has created a bind for Trump: Plunging oil prices are savaging the industry and U.S. drivers can't enjoy lower prices.
The agreement announced Sunday by Russia, Saudi Arabia and other oil-producing countries to cut back output is not likely to raise fuel prices much for American consumers in the weeks and months ahead.
“This is a fairly new situation,” said Antoine Rostand, president of Kayrros, an energy research and consulting firm. “Those who could enjoy low prices are stuck at home,” he said, and U.S. oil producers are suffering the downside of depressed prices.Gasoline prices are certainly falling. The national average for regular gas dropped to $1.92 per gallon in the week ending April 6, below $2 for the first time in more than four years and down 50 cents from just a month earlier.
Before the 2018 midterm elections, when the price of gasoline was rising to nearly $3 per gallon, Trump jawboned Saudi Arabia to boost its production to get prices down. “That’s really unprecedented,” said Kayrros’ Rostand. “It really reflects the reality on the ground: that there’s a very dramatic imbalance between supply and demand.”
Today the world’s stockpile of oil stands at 728 million barrels. With the global economy in recession, it could take three to four years to draw that down, she said.Certainly, the mismatch between supply and demand was exacerbated by the price war between Russia and Saudi Arabia, two of the biggest oil producers. They sought to gobble up a larger share of the oil market by producing more and swallowing the resulting price declines.
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