Trump’s Oil Summit

Tariffs and quotas won’t solve a price shock caused by a pandemic and a Saudi Arabia-Russia feud.

U.S. crude oil prices jumped 25% Thursday to $25.32 a barrel after President Trump suggested that Saudi Arabia and Russia could soon settle their destructive price war. This is all the more reason to resist calls from the U.S. shale patch for domestic production quotas or import duties when he meets with oil executives on Friday.

A one-two punch to demand and supply threatens to bankrupt many American shale producers. Some experts now predict that oil demand could fall by a quarter this year at the same time as Russia and Saudi Arabia are opening their spigots in a game of chicken. But tariffs or quotas would do more harm than good.

Start with quotas, which aren’t likely to be followed.

In any case Saudi Arabia and Russia may agree to cuts out of mutual self-interest. “I expect [and] hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more,” Mr. Trump tweeted Thursday.

Russian private oil executives have begged the Kremlin to settle its Saudi stand-off, which Lukoil Vice President for Strategic Development Leonid Fedun predicted the U.S. would win. Experts predict a severe recession in Russia if oil prices remain below $30 per barrel. Low prices are also raising the economic and political price for the Kremlin of propping up the Maduro regime in Venezuela. Saudi Arabia can pump oil at a lower cost than almost anywhere, but Crown Prince Mohammed bin Salman needs a price of about $80 a barrel to balance the Kingdom’s budget.

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