Should Trump Set A Floor Under Oil Prices?

I had an interesting email inquiry from a reader over the weekend. I don’t know if he’d want to be identified by his full name, so let’s just refer to him as Sergio. The email poses an interesting question that has not received much, if any, public discussion, so I decided to address it here.

The note was fairly long, but here are some excerpts that capture the essence of his inquiry:

“I read with interest your recent article in OilPrice about the US achieving “energy dominance”. You note that what the US oil and gas industry most needs is sustainable prices for oil and gas. I suspect that having some certainty that oil prices will not drop below a certain sustainable level would be of immense benefit to the industry, even more so than having higher prices that may not last for long.

It seems to me that this could be achieved by the US govt setting a price floor for crude oil sold in the US, at a level that is at least sustainable for most of the shale oil industry. A price floor of say $45 – $50 per barrel might do the job at the moment, and because that is about the current oil price it could probably be imposed by the govt without any large political backlash. After all it would not raise the current gasoline price. In fact it could even be a popular move if sold to the public in an intelligent manner.”

Ok, let’s stop there. Any such policy would naturally be a proposal by the Republican Party, given the long history of the Democratic party of opposing any policy that might benefit the oil and gas industry. That eliminates any thought of such a proposal being “sold to the public in an intelligent manner”, right? I mean, these are Republicans we’re talking about.

Let’s move on.

 

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