President Trump Promises to Help Mexico Cut Oil Production

Guest “can he do that?” by David Middleton

Trump says US will ‘help Mexico along’ with its OPEC+ production cuts

President Donald Trump said on Friday that the United States would “help Mexico along” with oil production cuts that it is meant to make under a global deal to shore up slumping crude oil prices, but said the details had yet to be worked out.

The comments suggest that Trump could be considering an unprecedented effort to orchestrate a production cut in the United States, historically the world’s most vocal proponent of the free market.


President Lopez Obrador said earlier on Friday that Trump had agreed help out by cutting additional U.S. output after Mexico offered OPEC+ a cut of just 100,000 bpd, a quarter of what the group demanded. He said Trump “very generously said to me that they were going to help us with the additional 250,000 (bpd) to what they are going to contribute.”

Trump had been a vocal proponent of global supply cuts, seen as crucial to saving the U.S. drilling industry from collapse, but has resisted calls that the United States also orchestrate a reduction in supplies – saying U.S. drillers were already slowing their output for economic reasons.

U.S. laws forbid companies from colluding to reduce supply and raise prices, but does not prevent the government from ordering such supply reductions.


While some state regulatory agencies, like the Texas Railroad Commission do have the power to restrict oil & gas production within their respective jurisdictions, I am not aware of any comparable powers at the Federal level. How could President Trump deliver on promises to cut US oil production? Well, Al Arabiya has the answer…

Coronavirus: Can the US government enforce oil output cuts along with Russia, OPEC?

Tom Ashby, Al Arabiya English Saturday 11 April 2020


This raises the question of whether the government actually has the legal power to enforce a production cut by its industry. Members of the Organization of the Petroleum Exporting Countries (OPEC) can instruct their state companies to reduce output, and where the oil is produced by private companies, they generally have clauses in their production agreements allowing the government to impose cuts.

In the United States, the situation is significantly more fragmented. The federal government has jurisdiction over offshore oil production in the Gulf of Mexico, while independent state commissions regulate the onshore industry in most oil producing states.

Most of these commissions have powers to regulate oil production in their states, in particular through their powers to prevent waste and pollution, according to industry analysts.


However, some analysts do not expect the US to take this approach.

“I don’t expect it to work like that,” said Roger Diwan, Vice President of IHS Markit. “They are just forecasting a decline in production because of low prices,” he added.

The US Energy Information Administration (EIA) on April 7 revised its forecast for US oil production down to 11.8 million barrels per day (bpd) this year, a fall of 500,000 bpd from 2019. In 2021, the EIA expects US crude production to decline further by 700,000 bpd.

“If realized, the 2020 production decline would mark the first annual decline since 2016,” it said in its latest short-term energy outlook.

In the oil cut talks, negotiators have been using much larger estimates of the decline in US output.


Al Arabiya English

I would not be surprised to see US oil production fall by 2 million bbl/d from the 2019 peak by early 2021. So, President Trump just delivered a Josey Wales promise to Mexico and OPEC+…

Ten Bears : These things you say we will have, we already have.

Josey Wales : That’s true. I ain’t promising you nothing extra. I’m just giving you life and you’re giving me life. And I’m saying that men can live together without butchering one another.


The interesting part will be to see how the President plans hold US production down when prices begin to recover.

Day 25 of America Held Hostage by ChiCom-19

Dallas County numbers as of noon today…

Dallas CountyCHICOM-19
% of population with0.0623%0.00102%
% with, rounded0.1%0.00%
% without99.9377%99.9990%
% without, rounded99.9%100.00%
Menodoza Line (.200)5-Mar-20340.200

We can now expect 20% of the county to test positive for ChiCom-19 by March 5, 2034.

At the State level…

42 thoughts on “President Trump Promises to Help Mexico Cut Oil Production

  1. OK, David, 2 things. President Trump offers to cut production by 250,000 bpd and the predicted decline anyway is 700,000 bpd, so no pasa nada, and Texas, where Texas Tea is the official state drink, will certainly figure out how to adjust to this economic hiccup. Stay sane and safe.

    • He’s just promising to deliver a piece of what’s already happening… The Art of the Deal… 😎

  2. “The comments suggest that Trump could be considering an unprecedented effort to orchestrate a production cut in the United States, historically the world’s most vocal proponent of the free market.”

    The mistake most people make here is to assume that oil is a “free market”. It is subject to massive manipulation by sometimes malevolent state actors and it’s naïve to think otherwise.

    The same is true of any market involving China, which uses authoritarian state power to skew markets to its strategic advantage.

    • ” The same is true of any market involving China, which uses authoritarian state power to skew markets to its strategic advantage.”

      Sorry Mr Johnson but…are you suggesting that we inhabit a world where the USA does NOT use its authoritarian power to skew markets – and everything else – to its (ultimately beltway) advantage? It never ceases to amaze how many Americans fail to observe – or acknowledge – that its mega-corporations have in many instances become de facto extensions of Washington’s power. The principle of “revolving-door” staffing between the senate, congress, beltway think-tanks, research and higher education institutions – and corporate lobbying – is seen as the “free market” whenever it’s ideologically convenient, and “the swamp” when politically expedient.

      One mental modelling trick that might prove useful is known as “Inversion”, where one applies the same standards and prism to onesself as one does to others – specifically for the purpose of strenghtening perceptions, and thus decision making.

      For the record I do agree: China is undoubtedly an authoritarian system. I’ve personally criss-crossed that country by plane, road and train and concluded that, while it is deeply flawed and will have to adjust course over the long-term, the way that it is structured and run cannot be separated from the simple reality that is is a Civilizational State with a deeply – perhaps even epigenetically embedded -collectivist mindset. I assure you that the overwhelming majority of Chinese citizens are quite comfortable with going along with the current trajectory; eggs will be broken, but omelettes will be made.

      Chinese civilisation is re-awakening after hundreds of years of Confucian slumber and many decades of abuse and punishment by both external forces and internal failures. The problem the West, and particularly the US, has with it is that it DARES question and undermine America’s much hyped ‘Unipolar Moment’, and the (rapidly unravelling) Transatlantic Alliance’s ability to act with impunity across the globe. Do I think China is a “force for good” in the world? Way too early to tell. But it should be evident to anyone with eyes is that the US had its moment to “lead”…and blew it. Which is a great, not to mention potentially grave, pity indeed.

      • Peter Buchan April 11, 2020 at 10:10 pm
        “But it should be evident to anyone with eyes is that the US had its moment to “lead”…and blew it.”

        Since my vision appears to be cloudy, could you please embellish on your comment, explain what you meant, and tell us when that moment was?

        • PMHinSC

          Sorry, but I am not about to hand you a pair of specs to assist. However, if you are unfamiliar with geo-political and geo-strategic theory then look up the term “America’s Unipolar Moment” – the origin of which has aften been credited to Charles Krauthammer. It is, obviously, not a “moment” in the literal sense but rather a descriptive term.

          To ground you further, perhaps it might help look up well-established geo-strategic terms and works such as a) Heartland Theory b) Rimland Theory c) Brzezinki’s “Grand Chessboard” and d) its subsequent amendment/refinement known as the “Wolfowitz’s Doctrine”.

          Lastly perhaps you’d care to mention a single foreign policy interaction and/or intervention undertaken by the US in the post WW2 era that resulted in an unequivocally positive outcome for the “target” territory or nation? Meaing on it’s terms, not those of the US? And before you get flag-triggered, note that I am not judging “the American people” here – I know the country very well and even count the US DoD among my customers.

          Thing is, there is nuance in everything – but unfortunately the US government and media have, over time, reduced its collective world view to a Manichean caricature. The reality is that US (meaning Beltway) leadership elected to take that unique, unprecedented “Moment” and exploit it on behalf of its transnational corporations, the military industrial complex – and the expedient molycoddling of what you might term unipolar ideologues. Sorry, but the world has woken up and, unlike yours, its vision has cleared.

          Whether peace can be maintained in the now-inevitable multipolar world order is quite another matter, of course. But even if it does not, the alternative is not going to be a return to (global) US “leadership”.

      • P Buchan,

        You write: “…the US had its moment to “lead”…and blew it. Which is a great, not to mention potentially grave, pity indeed.”

        Please explain what you mean by “the US had its moment to “lead”. Which moment was that and what did we do to blow that opportunity? How should our leadership have manifest and when?

        • Mr Rocks,

          Pertaining to your final question: the framing suggests that you may be unfamiliar with either the sermons delivered to the rest of the world by US statesmen and their cohorts over decades about American leadership and “exceptionalism”, or the rationale provided for US intervention and power projection across the globe – or both.

          No whingeing here, to be sure: – I am a realist and a pragmatist and I am well aware that the only reason lions rule in Africa is because there are no tigers here. It is when the law of the jungle is hidden within silky rhetoric, media-propaganda, proxy-payoffs to tin-pot dictatorships in freshly printed fiat “global reserve” currency and the ever-lurking threat of sanctions and/or military interventionism that I take issue with people who point the finger at “authoritarianism” they see elsewhere.

          It would be better for all of us if more people had the courage to call things by their proper names. Don’t you agree?


  3. Don’t quite understand “cases” as shown in Worldometer. Is cases defined as people who tested “positive” , which is those people who were sick enough to seek treatment, and as those are the only ones being tested, a large number of people who had mild to no outward reaction, and didnt seek medical help are not counted in the percentages.

    Anyone know how cases are defined.

    • “Anyone know how cases are defined.” No. And they’re lying if they say they do. It varies. If you look at the reductions in average deaths due to other morbidness then you can only assume that #19 deaths are being improperly assigned. One reason why the current antibody tests are so important. Is it the common cold or not or somewhere in between? I say it’s worse than common flu but won’t bet on it.

    • The combination of a corrupt Mexican government’s on-going inability to meet basic citizen needs (economic, jobs, health, education, corruption-free administration) and a historically corrupt oil industry (looted by the government and others) are a substantial source of the pressure forcing Mexicans to immigrate to the USA.

      If the USA played hard-ball, forcing Mexico to cut oil, Mexico may not have met their commitment, damaging the US oil industry & increasing immigration pressure; Trump’s compromise at this moment maybe the least bad option.

    • Most US oil companies have somewhat similar hedge positions. The US and Mexico are better positioned for a year of low oil prices than anyone else.

  4. Can’t say I’ve a problem with orchestrating a production cut – perspectives change, depending on whether you’re importing or have more than enough for your domestic market. That the US has been under curtailment in times past is simply a fact and that capacity would be harder to bring back, if driven under by low prices, is another.

    As for China – I wish the open market price for them was/and would continue to be around $60 to $75. That Russia would benefit would be a negative, but….

  5. Trump could offer to buy 250,000 bpd and then store it…but that can’t last long without an increase in storage capacity – and he would have to find the funding but that would be chicken feed compared to what they are already spending.

    He could shut down extraction on Federal lands – I think…

    He could offer to pay certain oil companies to not pump oil – wow, now that’s just stupid enough to work. I mean if you are already giving money to oil companies, you just caveat it with produce less until prices reach some higher point.

    Oil is dirt cheap, and no one is needing it – who would have thought? Ah well, we have all of these stupid wind turbines to keep us happy I guess. :-\

    That reminds me – how are gas prices doing? Gas pricing is tied into oil pricing isn’t it? We should be getting *really* cheap electricity about now.

    • He can incentivize production allocations without spending a dime. There are dozens of things he can do to reduce or delay costs to operators.

  6. My bet is that Trump will promise a lot and deliver what is best for us. Why do I think he has our back? Because that’s how he operates. Warts and all.

    • He’ll deliver exactly what the other side of the deal already has and make it look like he was doing him a favor.

  7. “The interesting part will be to see how the President plans hold US production down when prices begin to recover.” – Now that is the $60/barrel question! Especially if it takes more than 5 years to recover there may be another president in the Whitehouse by then. Will they honor Trump’s deal?

    Export restrictions only. The US will agree to export limits. Minor concession at best but OPEC could say “We won” and save face. The US would not be competing for their foreign markets. Minor though it is that would be something.
    That would exclude the SPR (700 million barrels). The US could then use that to fill and empty so a nice buffer to take off the highs and lows creating price stability.

    Or come to an agreement then arbitrarily walk away from it later. Lots of precedence for that one.

    • There are lawful ways that the President could slow the resumption of production growth from Federal leases, particularly in the Gulf of Mexico. He could suspend royalties, extend leases and stretch out the deadlines for plugging & abandoning and removing inactive infrastructure, in exchange for oil companies that agree to abide by voluntary production allocations. I think he could lawfully do this administratively.

      He could also broker agreements with State regulatory agencies for similar arrangements.

      • “could suspend royalties”

        You mean that royalties are not indexed on price?

        If so, I think it’s dumb.

        • Royalties on Gulf of Mexico Federal leases range from 12.5% to 18.67% of gross production. Most leases are 16.67% (1/8). The Obama maladministration raised the royalty rate for new leases to 18.67%. The Trump adminstration reduced it to 12.5%. Most Gulf of Mexico production is 16.67%; the Federal government gets 1/8 of the gross revenue.

          At various times royalties were suspended under certain conditions. The Clinton administration suspended royalties on Deepwater production for a period of time and the Bush administration suspended royalties for deep (>15,000′) natural gas production. BOEM also has the administrative power to waive royalties on a case-by-case basis, but they rarely approve requests.

  8. so Trump’s plan to make America great again and protect it from the Mexcian rapists is to make
    Americans pay more for petrol in order to benefit those same rapists, drug dealers and murderers.
    Or is this just going to be another one of Trump’s lies and broken promises.

    • Most US oil companies have somewhat similar hedge positions. This doesn’t incentivize lower oil prices. It provides an insurance policy against them.

      Mexico only produces about 2.5 million bbl/d and consumes (pre-hostage crisis) about 2 million bbl/d. Their production has already fallen by about 400,000 bbl/d since 2014. So they really don’t have any spare capacity to cut. The US, on the other hand, will see a price-driven drop in production that will more than offset Mexico’s share of OPEC cuts. This assistance will have a price:

      What I thought I would do, and I don’t know that it is going to be accepted, we’ll find out, the United States will help Mexico along and they’ll reimburse us sometime at a later date when they are prepared to do so,” Trump said during a White House briefing on the coronavirus.

      What will the reimbursement look like? Border wall funding? Resolution of the dispute over the Zama discovery in favor of the US operator? Trump is a master of sand bagging. He’s always a dozen steps ahead of where his opponents think he is.

  9. President Trump Promises to Help Mexico Cut Oil Production
    Guest “can he do that?”

    I reckon so…

  10. My bet is, he will divert the excess production too the strategic petroleum reserve, which effectively takes it off the market, and at bargain basement prices.

    As of April 10, the reserve was about 160mb from full. At 250kbpd, that’s a million barrels per 4 days so would take 160*4 = 640 days to fill up at that rate. And at current prices, can give US producers a premium to keep them in business, even $40 a barrel is cheap, so only cost about $6.5B to fill up!

    Just my guess on what’s gonna happen


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