The Financial times Recently reported that President Trump encourages OPEC producers to stimulate the offer:
Donald Trump called Opec to lower global oil prices and insisted that central banks around the world then lower the interest rates “immediately”.
In a speech for managers in Davos on Thursday, the US President at Saudi Aarabia and other producers urged the costs of crude oil to lower, so that they expressed this they had not done this yet.
“I’m going to ask Saudi Arabia and OPEC to lower the oil costs. You have to bring it down. To be honest, I am surprised that they did not do it before the elections, “he said.
“At the moment the price is high enough that that war will continue,” he said, referring to the full invasion of Russia in Ukraine and suggested that the raised oil price helped to support Putin’s war machine.
“You have to lower the oil price, which will put an end to that war. You could end that war, “he added.
The oil prices seemed to have fallen somewhat.
I have mixed feelings about these claims. In the past I have argued that we have to remove those sanctions against Iran and Venezuela that limit their ability to export oil. I suggested that this would be the most effective way to help Ukraine in his war with Russia and North Korea, because it would reduce the income flow that helps Russia to finance its war machine. Trump opposes that kind of sanction lighting, but if OPEC would respond as Trump suggested, I believe that this would also help Ukraine for similar reasons.
I am less confident in the interest rate. It is true that lower inflation often leads to lower nominal interest rates. But the correlation is usually between the inflation of the demand side and interest rates. The FED tends to ‘view’ changes in inflation as a result of price shocks in a single industry, and instead focuses on movements in the core percentage of inflation, which it is believed to reflect the underlying trend. It is possible that lower oil prices would have some effect on interest rates, but I suspect that the effect would be extremely small.
Despite my reservations, it is nice to see that Trump appreciates the benefits of cheap import of a good where the US is a large producer.