Analysis: The U.S. is running out of ways to get oil prices down. It is up to the military.
- The Trump administration’s efforts to get oil prices down amid the war in Iran aren’t having much effect.
- Americans are paying 23% more at the pump for a gallon of gas despite a plan to release 400 million barrels of oil from global strategic petroleum reserves.
- A military breakthrough will likely be required to lower oil prices, and it isn’t clear when that could happen.
The Trump administration has rolled out a series of measures to attempt to blunt the blow of the Iran-driven oil-price hike, and yet prices remain stubbornly high.
As the war rolls on, it is becoming clear there isn’t much the U.S. or any other government can do to provide relief from higher oil prices short of ending the conflict.
It will take a military breakthrough to get oil flowing and reduce energy prices. That means this episode is sharply different from past market crises that President Donald Trump has muddled through. A pattern of escalating political tensions followed by fast economic relief that has held through Trump’s second presidency may finally be breaking.
This is a problem Trump can’t solve through economic policy.
The economic math is uncompromising. The war will cut the global supply of oil by about 8 million barrels a day in March, the International Energy Agency estimated Thursday. That accounts for the near-closure of the Strait of Hormuz, the narrow waterway bordered by Iran that carries as much as 20 million barrels a day in normal times, as well as the oil industry’s attempts to route around the problem and production increases elsewhere.
The Trump administration and other governments are trying to get more oil onto the market, most substantially by releasing some 400 million barrels from strategic reserves. But it won’t come all at once. The U.S. portion will amount to about 1.4 million barrels a day over roughly four months, based on plans from the Department of Energy. All told, the global release will amount to perhaps 3 million barrels a day, according to estimates by Goldman Sachs shared with clients.
These figures are rough estimates made quickly during wartime and should be taken with a grain of salt. But the overall result is clear: Government reserves probably can’t make up even half of the daily shortfall driven by the war.
The administration has several other plans in motion. Treasury Secretary Scott Bessent said on Thursday the administration would to ease some sanctions on Russian oil. The U.S. International Development Finance Corporation is working on a plan to backstop insurance for ships in the region.
Oil prices rose Friday despite those measures. A gallon of regular costs $0.69 more Friday than it did a month ago, according to AAA. That is a 23% increase. A barrel of oil on the U.S. market would have cost about $63 in mid-February. It was $97 at midday Friday.
The White House is well-aware of Americans’ concerns. The president has said the short-term cost of higher prices is necessary to end the threat of the Iranian nuclear program.
