The weekly average retail diesel price saw its first decline in five weeks, coinciding with a drop in oil prices and a familiar call for OPEC action from former President Trump. This echoes a pattern from his previous administration, raising questions about the potential impact of such pronouncements on energy markets.
Table Content:
A Familiar Refrain on Oil Prices
The Department of Energy’s Energy Information Administration reported a 5.6 cents/gallon decrease in the average weekly retail diesel price, settling at $3.659. This follows a significant 11.3 cents/gallon increase the prior week. Notably, this shift occurred during the first full week of the second Trump administration, marked by a presidential appeal to OPEC for lower oil prices – a recurring theme from his first term.
During his initial presidency, Trump’s periodic calls for OPEC to reduce prices, often accompanied by implied threats, frequently resulted in market declines. This phenomenon was sometimes referred to as the “Trump put,” alluding to a put option that allows holders to sell oil at a predetermined price, potentially profiting when market prices fall below that agreed-upon level. Trump’s pronouncements often became self-fulfilling prophecies, boosting the profitability of certain put options.
OPEC’s Role and Market Dynamics
News reports indicated that at the World Economic Forum in Davos, Trump expressed surprise at OPEC’s inaction on oil prices. However, while OPEC and its broader OPEC+ alliance (including non-OPEC exporters like Russia) set production quotas, they do not directly control prices.
OPEC+ had planned production increases for January, but a sluggish market in early December prompted a postponement to April. This delay marked a repeated pattern of production adjustments in response to market conditions. The decision to postpone increases was made on December 5th, with Brent crude (the global benchmark) priced at $72.09/barrel. Brent subsequently reached a high of $82.03/barrel on January 15th, a surge attributed to sanctions on Russian shipping imposed during the final days of the Biden administration.
Market Response and Shifting Influence
Even during Trump’s first term, there were signs that markets were becoming less responsive to his demands for lower oil prices. Last week’s pronouncements coincided with a declining market. Brent settled at $79/barrel on Wednesday, closing at $78.29/barrel on Thursday following Trump’s comments. Friday saw a slight rebound to $78.50/barrel, while Monday’s settlement dipped to $77.08/barrel, aligning with a broader decline in equity markets. Notably, there was minimal market speculation attributing these fluctuations directly to Trump’s call for lower prices. This suggests a potential waning influence of such pronouncements on market behavior.
Conclusion: A Diminished Impact?
The recent decline in diesel prices, coupled with falling oil prices and Trump’s renewed call for OPEC intervention, presents a familiar scenario from his previous administration. However, the muted market response raises questions about the continuing effectiveness of such pronouncements. While the “Trump put” may have once held sway, market dynamics and geopolitical factors appear to be playing a more significant role in shaping oil and diesel price trends. The long-term impact of these pronouncements remains to be seen.
