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Trump’s oil price pressure threatens Kuwait’s budget

KUWAIT CITY - In response to Donald Trump’s statements regarding pressure on OPEC-plus to reduce oil prices and the potential impact on the budgets of Gulf countries, including Kuwait, oil and economic experts emphasized the importance of the region’s countries to be prepared for any unforeseen crisis.

In an exclusive interview with the daily, they highlighted the potential negative effects Trump’s statements can have on Kuwait’s budget, which is heavily reliant on oil prices.

The experts said Trump’s statements are unlikely to resonate with the American public and the member states of OPEC-plus, as such actions could harm the U.S. economy. They indicated that the United States produces more than 13 million barrels of oil per day and operates 132 oil refineries.

The experts stressed the need for Kuwait and other Gulf nations to diversify their income sources, and attract foreign investments.

Meanwhile, oil refining and marketing expert Abdul Hamid Al-Awadhi said Donald Trump’s statements about oil prices and the potential imposition of taxes on certain countries could impact the global economy for several reasons, the first of which is that Trump is the head of the largest nation in the world that carries significant influence.

He explained that the United States plays a pivotal role in the oil sector, as it is the largest importer and consumer of oil. Currently, the U.S. produces about 13 million barrels of oil per day and operates 132 oil refineries. Even a modest ten-cent increase in the price of gasoline can cause considerable disruption in the U.S. economy. Also, oil is traded in U.S. dollars, which adds another layer of complexity to the situation.

Trump’s statements about expanding U.S. oil production both on land and at sea are feasible, given America’s capability to increase production.

His goal is to restore the U.S. as the world leader in oil production and technology. His statements should not be overlooked, especially since oil constitutes 60 percent of the global economy.

Trump seeks to impose economic dominance globally, which is why he has proposed economic sanctions on South America such as Venezuela and Mexico, in addition to imposing taxes on oil imported from Canada.

This is particularly significant since Canadian oil is sold in U.S. states bordering Canada, such as Chicago. However, raising taxes on oil could have unintended consequences, as it could result in higher product prices for American consumers.

Al-Awadhi linked Trump’s comments about the decline in oil prices to his interactions with the Kingdom of Saudi Arabia. He went on to explain that Saudi Arabia currently exports around 11 million barrels of oil per day but it can increase production to 13 million barrels per day.

Trump is trying to outwit it by encouraging Saudi Arabia to accept lower oil prices in exchange for expanding its investments in the U.S. Trump understands Saudi Arabia’s position as the largest oil producer globally and recognizes that if Saudi Arabia were to stop exporting oil, it could trigger a global economic crisis.

Al-Awadhi highlighted the 1973 war, during which the Arabs fought against Israel to liberate the occupied Arab lands, as evidence of Saudi Arabia’s power in using oil as a geopolitical tool. Unlike the Arab defeat in the 1967 war, during the 1973 conflict, Saudi Arabia and the Gulf states used oil as a strategic weapon by halting exports. This move played an effective role in shifting the war’s course in favor of the Arabs. This Gulf-Arab strategy led to the decline of the American and European industrial and trade sectors, with oil prices skyrocketing from USD 2.7-3 per barrel to USD 12-15 per barrel for Western consumers. Since then, the U.S. began to think strategically about how to prevent such difficult circumstances in the future by setting policies to ensure a steady supply of oil at acceptable prices and diminishing the effectiveness of the oil embargo as a geopolitical weapon.

Regarding the economic impact of Trump’s statements on the Gulf countries, Al-Awadhi highlighted the region’s huge oil and gas reserves, which account for more than 44 percent of the world’s total oil reserves. He explained that the Gulf region is home to the two largest fields in the world - Saudi Arabia’s “Ghawar” field and Kuwait’s “Burgan” field. Also, the UAE has the second-largest fuel supply station for ships globally, which plays a crucial role in facilitating maritime travel from the Far East to the Far West. These factors make the Gulf countries strategically important and have garnered special attention from U.S. presidents, including Trump. Al-Awadhi recalled that before Trump’s presidency, he had written an article in 2016 in which he highlighted that Trump’s election campaign was focused on oil and the Gulf countries, particularly Kuwait.