The Organisation of Petroleum Exporting Countries (OPEC) said it will not take any deliberate actions towards reducing global oil prices despite demands by US President, Donald Trump, last week.
Instead, the organisation will continue to allow the market forces of demand and supply to determine the prices at which the essential commodity is traded.
Trump, in his decree-like manner, had taken to Twitter (over the weekend) to subliminally threaten OPEC members, demanding that they immediately reduce crude prices or risk America’s disfavour.
We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!
— Donald J. Trump (@realDonaldTrump) September 20, 2018
Understanding the oil price tussle
The global crude oil prices have been on the increase in recent times, currently trading at $80 per barrel according to global benchmark – Brent. This has been influenced by several factors, including rising demand in China and unrest in some parts of the Middle East which have resulted in a reduction in oil output.
Note that the crude oil market works in such a way that decreased output by OPEC members ultimately results in a hike in prices. Now, President Trump’s demand that OPEC reduces global oil prices is more or less like him asking the organisation to pump more crude into the market in order to drive down prices.
OPEC will only boost crude output if customer demand for the commodity increases, said Saudi Arabia’s Energy Minister, Khalid Al-Fahil.
“Our plan is to meet demand. The reason Saudi Arabia didn’t increase more is because all of our customers are receiving all of the barrels they want.” – Al-Fahil
Trump himself has contributed to the spike in oil prices
Recall that America, under President Trump, has recently imposed economic sanctions on Iran due to the Middle East country’s nuclear activities. The sanction included a ban on Iranian oil, which in turn contributed to the decline in crude output.
Therefore, it is interesting to see Trump trying to eat his cake and have it by thinking he can cripple Iran’s economy whilst preventing oil price hike all at once.
His constant tweets about the development are not helping his agenda either as it could even be helping to drive up the price of the commodity.
The current situation is good for Nigeria
The continued increase in global oil prices is good for Nigeria, seeing as the country’s economy is almost entirely dependent on foreign exchange earned through crude exportation. The country is an OPEC member, and one of the biggest crude exporters in Africa and the world.