On Tuesday, President Trump announced to widespread astonishment that he had fired Secretary of State and former ExxonMobile (NYSE: XOM) CEO Rex Tillerson. The announcement was made, like many of Trump's pronouncements, via Twitter: "Mike Pompeo, Director of the CIA, will become our new Secretary of State. He will do a fantastic job! Thank you to Rex Tillerson for his service! Gina Haspel will become the new Director of the CIA, and the first woman so chosen. Congratulations to all!" Democrats are pointing to Tillerson's sudden firing as evidence of a Capital Hill in chaos. "It is no wonder that the President has trouble attracting high-caliber people to his administration when he undercuts and humiliates those he supposedly respects," said Democratic House Minority Leader Nancy Pelosi, "Whenever Secretary Tillerson's successor goes into meetings with foreign leaders, his credibility will be diminished as someone who could be here today and gone tomorrow." Other Democrats, such as Deleware Senator Chris Coons, merely expressed confusion at the timing of the change. "That he chose to dismiss his secretary of state...at the exact moment that diplomacy is essential to securing some path forward with North Korea - strikes me as just irresponsible."
Tillerson had many profound disagreements with Trump: he favored the Iran nuclear deal, which the President loathed; he wanted the U.S. to remain committed to the Paris climate accord, from which Trump withdrewl and he emphasized the importance of a committed dialogue with North Korea in order to move towards peace, while Trump repeatedly threatened military action.
While it may seem like a personal disagreement, some experts have expressed more profound reservations about Tillerson's qualifications, and whether or not he has been an effective Secretary of State. His experience as CEO of ExxonMobile gave him leverage with many Middle Eastern nations, as well as with Russia's President Vladimir Putin. Yet foreign diplomats complained that the Secretary of State did not return phone calls. He set up meetings with his counterparts without advance warnings to their respective nations, and often cancelled these meetings without explanation. Policymaking in the State Department was by and large been reduced to talks between Tillerson and one aide, neither of whom possessed the necessary experience for the job.
Despite these inadequacies, it is largely the ideological differences between Trump and Tillerson that spurred the latter's firing. The principal economic consequence of Tillerson's departure is uncertainty in the oil industry. Pompeo, in contrast with his predecessor, does not support the Iran nuclear deal. In addition, he shares President Trump's hawkish views on foreign policy. Many believe that he will work alongside Trump to enact more punitive measures against nations that the commander in chief perceives as rivals. This may include stricter sanctions on Venezuela, which in conjunction with the potential withdrawal of the U.S. from the Iran deal raises the geopolitical risk premium in oil markets. This in turn may interfere with crude output just as supply begins to dwindle in the face of strong demand. The result: rising oil prices worldwide.
These consequences have yet to come into effect just yet as the international community waits to see how Pompeo will proceed in his new post.