An oil well in Midland, Texas, idled by the world oil glut is juxtaposed against partially built homes caught in the oil bust. (Photo by Spencer Platt/Getty Images)
Donald Trump is taking credit for lower gasoline pump prices in a cynical political ploy while ignoring a Saudi effort to undercut U.S. producers and force them from the market.
Gasoline prices are lower simply because the Saudis are manipulating the market by raising production and depressing prices, according to market analysts.
Oil closed today (Dec. 9) at just over $58 a barrel, a 16% decline this year.
The average national gasoline price has fallen to its lowest level since 2021. The median U.S. gas price is now $2.79 per gallon, about 4 cents lower from a week ago.
Saudi Arabia, as the dominant force in OPEC+, wields significant power to reshape global oil markets, often acting strategically against U.S. interests, despite a cozy relationship with the Trump administration.
The Saudi oil strategy involves increasing production, not just to manage the market but also to regain market share from U.S. shale producers and force higher-cost producers, including U.S. shale, to exit the market.
Trump, who has close ties to the kingdom, knows the Saudis are doing this. But he’d rather score political points than address the problem — a clear attack on U.S. oil companies that will ultimately force higher pump prices.
Oil prices have fallen below $60 a barrel on world markets due to growing global supply outpacing weakening demand as economies in the United States and elsewhere slow down.
Consumers are benefitting from lower pump prices, and Trump is taking political credit, while the Saudis are trading short-term financial pain for long-term market dominance, at the expense of the United States.
The kingdom’s ultimate goal is to force market consolidation allowing it to control prices. Its stated target price for oil is around $80 to $100 a barrel to cover the cost of its own economic initiatives.
The jockeying for oil market dominance started in 2020 during the pandemic lockdown. Oil prices experienced a historic drop in April 2020, as people stayed at home.
Benchmark West Texas Intermediate oil prices collapsed. Producers were effectively paying buyers to take the oil off their hands due to a lack of storage capacity.
Trump intervened in the market and negotiated a two-year cutback in oil production with Saudi Arabia, Russia and other countries to prop up US oil companies. The unprecedented cut was finalized on April 12, 2020. Trump often brags about it.
Starting that May, the deal took nearly 10 million barrels of oil per day off the market. But that led to an artificial shortage when the pandemic ended.
Consumer demand soared, outpacing the slow recovery of oil production and refining capacity.
Russia’s invasion of Ukraine in February 2022 further disrupted global energy markets, leading to sanctions on Russian oil and pushing crude oil prices even higher.
The average annual price for a gallon of regular unleaded gasoline was $2.60 in 2019 before Trump’s deal compared with $3.95 (unadjusted for inflation), afterward in 2022.
Saudi Arabia started ramping up oil production in a price war with Russia in 2020. By April this year, the kindom and OPEC+ had exploded with a faster-than-expected production increase, adding hundreds of thousands of barrels per day to world supplies.
U.S. oil companies can’t profitably pump oil for long with prices around the current $60 a barrel. The Saudis can because their production costs are lower.
Trump’s inaction over the Saudi threat is clearly setting up consumers for higher gas prices in the near future.
The kingdome and OPEC+ have already signaled that they would pause planned production increases during the first quarter of next year.
The oil market could face an even greater shock if the Trump administration provokes a conflict with Venezuela, which has the worlds largest oil reserves.
In the face of Trump sanctions, Venezuela is only producing an estimated 900,000 barrels a day this year, down from 3 million barrels 20 years ago and 2 million barrels in 2017, according to analyst Wood Mackenzie.
Now you know why gas prices are lower. Enjoy them while you can. Expect them to rise starting in the first quarter of 2026 as the Saudis and OPEC+ cut production to boost prices toward their true target goal.