The ongoing energy crisis has become a political nightmare for the Trump administration, with rising gas prices and inflation blamed on President Trump. The situation has reached a critical point, with gas prices threatening to surpass record highs set during the Biden era. Trump's administration has taken emergency measures, including draining the nation's oil reserves at an unprecedented rate and waiving shipping restrictions. However, these actions have not been sufficient to alleviate the crisis.
One expert, Jan Stuart, a global energy strategist at Piper Sandler, believes that the administration has limited options. Stuart predicts that gas prices will continue to rise, reaching $5 per gallon as early as this month, with Brent crude futures averaging $130 per barrel in the next quarter and remaining near $100 per barrel next year. The White House has pointed to temporary measures, such as a 60-day waiver to the Jones Act, but these have not been effective in addressing the long-term energy crisis.
The administration has also considered suspending the federal gas tax, but this has been met with skepticism. A gas tax holiday during the summer driving season would cost the Highway Trust Fund $11.5 billion in lost revenue and provide minimal relief to consumers. In fact, a gas tax holiday could exacerbate the problem by boosting fuel demand at a time of low supply, according to Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy.
Some lawmakers have proposed a more extreme measure: restricting or even banning US exports of crude oil, gasoline, and other petroleum products. However, this could have unintended consequences, such as cutting back on gasoline production, crushing Texas oil companies, and causing a global oil price surge, which would negatively impact the world economy.
The administration's inability to address the energy crisis has led some to question the effectiveness of Trump's policies. The White House's reliance on Saudi Arabia to control gas prices has also been unsuccessful due to the shutdown of the Strait of Hormuz, which has blocked many of Saudi Arabia’s oil exports.
The situation has raised concerns about a potential new round of fighting in the standoff with Iran. Energy market veterans, such as Bob McNally, founder and president of Rapidan Energy Group, predict a 10% chance of a deal that reopens the Strait of Hormuz in the near term, a 20% chance of the status quo, and a 70% chance of renewed hostilities over the next four to six weeks. A new outbreak of fighting could drive energy prices even higher, with McNally expecting Brent crude oil futures to surge to around $150 per barrel, approaching the all-time high of $147.50 set in July 2008 during the Great Recession.
In conclusion, the energy crisis has reached a critical point, and the Trump administration's options are limited. The reopening of the Strait of Hormuz is the only policy that can effectively solve the problem, according to McNally. However, the administration's inability to address the crisis has raised questions about the effectiveness of its policies and the potential for further conflict with Iran.
