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Opinion: Donald Trump's recent Cabinet picks are all about oil

Ryad Kramki/AFP/Getty Images

Word broke late Monday night that President-elect Donald Trump had indeed chosen oil magnate Rex Tillerson as secretary of state. Trump, in his preferred method of communication, confirmed the news Tuesday morning on Twitter:

The official statement from the Trump transition team speaks to Tillerson's ability to manage a huge multinational company and his understanding of geopolitics, not to mention his broad business ties to foreign governments and businesses. Tillerson is the CEO of Exxon Mobil, the world's eighth largest company by revenue, and the second-most profitable company in 2014.

Those ties have some on Capitol Hill squirming, notably Sens. John McCain (Ariz.) and Marco Rubio (Fla.). However, in light of some remarkable deal making in the energy industry lately, those ties may be exactly why Trump chose Tillerson.

The Wall Street Journal reported late last week that a historic deal has been made among oil-producing countries, members of Organization of the Petroleum Exporting Countries and non OPEC nations "designed to reduce a global oversupply of crude, lift prices and lend support to economies hurt by a two-year market slump." The Journal reported:

The agreement would remove 558,000 barrels a day of crude oil from the market. That would come on top of 1.2 million barrels a day in cuts already agreed to by OPEC, amounting to a total of almost 2% of global oil supply.

The non-OPEC cuts, if carried out as described over the first half of 2017, would represent an unprecedented level of cooperation among oil-producing countries that have been groping for ways to lift oil prices out of a two-year funk.

So there are big changes afoot in the energy sector. The deal between members of OPEC and nations outside that cartel marks the first time, according to the WSJ, that nations who produce more than half the world's oil supply will band together to influence the price of crude. It is a response to discrepancies between supply and demand in the energy sector that has been exacerbated by an American oil boom and machinations by Saudi Arabia to try to control its dominance of the market. And a huge player in this new restructuring? Russia.

More from the WSJ:

The bulk of the cuts — 300,000 barrels a day — have been pledged by Russia, which produces more crude oil than any other country. Other output reductions are promised by 10 other countries, including Oman, Azerbaijan and Sudan.

Big questions remain going forward. OPEC members themselves have a spotty record of enforcing their own agreements, and there is no legally binding way to deter producers inside or outside the cartel from cheating on their pledges.

That last paragraph is the most important with regard to Tillerson as head of the State Department. He may be just the man, with business and diplomatic ties as well as backing from former Secretary of State Condoleeza Rice and former Vice President Dick Cheney (who has reportedly already begun lobbying senators to confirm Tillerson), to ensure that OPEC keeps its promises and brings the world's oil market back into balance. He knows the players and he knows the game.

As an aside, it's being reported this morning that Trump plans to nominate former Texas Gov. Rick Perry to head the Department of Energy. Perry sits on two corporate boards, one being Energy Transfer Partners. That corporation has a subsidiary well-known to those following the oil pipeline protests at Standing Rock. It's called Dakota Access LLC, and is the builder of the pipeline in contention.

It would appear Trump is actively and intentionally mixing business with diplomacy. As far as the energy sector is concerned, that might be a good thing.

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