President Donald Trump quickly landed on a magic number in Venezuela: $50 for a barrel of oil. He might get it.
The president is reportedly settling on $50 per barrel as a key goal in what’s becoming an open-ended intervention in Venezuela with no end date. The U.S. has already assumed control of Venezuelan oil sales and engineered a handover of a month’s worth of its oil supplies, all while promising that U.S. oil companies will step in to help rebuild the country’s impoverished economy.
Trump’s preferred number will unnerve oil executives who are hoping for higher prices but unlikely to get them anytime soon. The U.S. oil and gas sector is shedding jobs even as the U.S. reaches record-levels of daily oil production, according to the Institute for Energy Economics and Financial Analysis. The trio of U.S. oil giants ExxonMobil, Chevron, and ConocoPhillips all announced steep workforce reductions last year.
Trump’s push to cut oil prices runs counter to the desire of the U.S. oil companies, which are struggling to maintain profits and shareholder dividends at high levels in the face of tumbling oil prices.
“Trump has an old energy narrative that if we have $50 a barrel oil, we’re going to have much lower gasoline prices,” Carolyn Kissane, an energy professor at New York University, told Quartz. “But you have a corollary on what it means for the U.S. energy companies: They’re not going to pump if they’re losing money.”
Analysts project oil prices will slide downward to $50 per barrel this summer. In the wake of the U.S. raid that removed Nicolás Maduro from power in Venezuela, oil trading hasn’t been turbulent. Venezuelan oil accounts for 1% of the global oil market, so its smaller output guarded against major price swerves in either direction. As of Friday, oil was trading at $59 per barrel, or a 3% increase from the start of the week. The bulk of the increase stems from mounting fears of supply disruptions following the outbreak of anti-government protests in Iran.
Going into the year, oil executives were already unnerved about the effect of lower oil prices on their business. “Decreasing oil prices are making many of our firm’s wells noneconomic,” one anonymous oil executive said in a quarterly survey published in late December from the Federal Reserve Bank of Dallas. Another survey participant responded that oil markets “may approach a balanced position” only if oil supplies from Iran and Venezuela remain depressed.
U.S. refineries are centered on the Gulf Coast. Break-even price for crude oil drillers stood at around $62 to $64 per barrel, according to the Energy Information Administration. Lower oil prices, though, may spur production cuts among the oil-producing nations of the Middle East and U.S. producers as well.
“He’s out of touch with the CEOs of the ExxonMobils the Chevrons,” Kissane argued of the president. “I’m sure they’re going insane about some of the remarks that he’s making internally because this is not great for their business model. Nor do they want to feel that they’re forced to go into a country that’s still incredibly unstable.”
Alongside several cabinet officials, Trump gathered with chief executives from the largest Western multinational companies on Friday. The roster on the U.S. side included the Chevron, ExxonMobil, ConocoPhillips, Continental Resources, Halliburton, and Marathon Petroleum. He announced late Thursday that the oil companies had pledged to spend “at least” $100 billion in Venezuela.