The global oil market is under pressure on all sides and there’s no relief in sight. These ultra-low oil prices could cause a lot of damage in the U.S. oil industry, but consumers probably won’t mind.
Cheap crude oil usually translates to cheap gasoline and, with a presidential election right around the corner, that could be a major advantage for the incumbent President Donald Trump.
Cost of oil and gasoline in the US: how will it impact the election.. Trump will say I've kept the prices down..supply and demand is one thing subsidies on big oil is another.. how will climate play into this? Expect Trump to attack on relevant issues on oil and gas! https://t.co/Su72b0qIZ4
— michael behling (@msbehling) March 8, 2020
How Did Oil Prices Get This Low?
Coronavirus brought China’s economy to a virtual halt and this had an immediate impact on crude oil prices. China is the world’s number-one crude oil consumer, so the outbreak put a significant dent in the demand side of the market. Crude oil prices nosedived immediately, so OPEC and its allies began to discuss supporting prices with supply cuts.
The discussions ultimately resulted in a major rift between to of the leading figures in OPEC-Plus, Saudi Arabia and Russia. Russia, who isn’t an official member of OPEC, didn’t want to pursue further price cuts, but the Saudis insisted. After weeks of stalled negotiations, Russia walked away from the table a few weeks ago, and the Saudis decided they were going to play hardball.
In a matter of days, Saudi Arabis was flooding the global oil market with cheap oil. That Saudi’s state-owned oil producer, Aramco, began selling its oil for as much as $10 below the list price of crude, sending crude oil prices tumbling.
Russia brushed off the Saudi price war. Russian officials have stated that its oil industry can survive at these price levels for over a decade.
The disruption to the Chinese economy started the crude oil sell-off by taking a large chunk of global demand offline, and the Saudi-Rusco price war oversupplied the market with cheap oil. The result, an epic crude oil sell-off that has left prices hovering near their lowest levels in nearly 20 years.
Falling gasoline prices at the pump must be having an impact on the election. Gas is down $.30 in the last 30 days. http://t.co/eNc4W9xO
— Traders Crucible (@traderscrucible) November 5, 2012
Cheap Gas Could Lift Trump
The U.S. is the world’s number-one oil producer, so the drop in crude oil prices will have a major impact on the domestic economy. However, many industries benefit from cheap oil, and consumers will surely appreciate cheap gasoline.
Oil prices haven’t been this low since the Fall of 2001, right after 9/11. Back then, gas cost an average of $1.46 per barrel, so Americans could easily see gasoline as cheap as $1.50 per gallon by the time election day comes around.
Cheap gas could have a major impact on the election. Americans notice when they’re paying less at the pump, and that usually benefits the incumbent party during an election. If gas prices stay low through November, it could score significant points for the Trump campaign
Oil and Gas Workers Will Flock to Trump
It seems likely that oil producers will embrace Trump as well. The oil and gas industry has been beaten down lately, and many participants in that sector of the economy see Trump as an ally. The recent turmoil in the oil market will likely drum up even more support for the president’s reelection.
The energy sector employed roughly 6.7 million Americans in 2019, and most of those employees know that the Democrats are hell-bent on dismantling the oil industry. Prices are so low that producers are going to have a rough time surviving over the next few months. It’s only going to be even harder if a Democrat wins.
The oil and gas industry will support Trump. After all, he is the only candidate that will support them. For the energy sector, there’s a lot on the line in this election. The severity of the crude oil situation could encourage more energy sector employees to get out and vote, and that could create even more support for Trump’s bid for a second term.
Cheap Oil is a Win for Republicans
Crude oil plays an important role in the American economy. Everyone is focussed on coronavirus right now, but the outbreak will subside eventually. When it does, the oil issue will be front and center. Cheap gas prices will likely give voters a favorable impression of the Trump administration, and hard times in the energy sector will likely drum up more support for the president as well.
No matter which way you look at it, it seems like cheap oil will give the Trump campaign a boost on election day.