Trump Seeks Relief on Gas Costs

The energy crisis is a financial burden for many, and a political challenge for the White House, with inflation rising and real wages shrinking, and voters blaming President Donald Trump for $4.50-a-gallon gas.

Trump’s administration has taken emergency steps to limit the damage, including draining oil from America’s stockpile at a record pace and waiving shipping restrictions.

Some sanctions on Russia and Venezuela have also been eased, but according to Jan Stuart, global energy strategist at Piper Sandler, “there’s precious little the administration can do” to slash gas prices.

Stuart expects the energy crisis to worsen this spring and summer, with gas prices potentially reaching $5 a gallon as soon as this month, and Brent crude futures averaging $130 a barrel next quarter.

The White House has pointed to steps Trump has taken to address energy market turmoil, including a 60-day waiver to the Jones Act, but a gas tax holiday is not seen as a viable solution.

A Penn Wharton Budget Model analysis found that a gas tax holiday would cost the Highway Trust Fund $11.5 billion in lost revenue without delivering significant relief to consumers.

Even filling up a 15-gallon gas tank once a week would only save a total of $35 during the pause, according to the analysis.

Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy, said a gas tax holiday would “boost fuel demand at a time of low supply”, which is the opposite of what’s needed.

Some lawmakers have called for the Trump administration to consider restricting or banning US exports of crude oil, gasoline, and other petroleum products, but analysts suspect this would have unintended consequences, and it could impact the use of private utility location services.

US Oil Production

Record-high US oil production has not accelerated since Trump took office, with US crude output increasing to 13.7 million barrels per day last week, according to preliminary estimates from the Energy Information Administration.

Forecasters at the EIA expect flat US oil production this year at 13.6 million barrels per day, with a modest increase to 14.1 million barrels per day projected for next year.

In the past, White House officials have turned to Saudi Arabia to keep a lid on gas prices, but this option is off the table due to the shutdown of the Strait of Hormuz, which has blocked many of Saudi Arabia’s oil exports.

The Strait of Hormuz

Bob McNally, founder and president of Rapidan Energy Group, said the most effective tool in the past was to call Saudi Arabia and ask them to increase supply, but this is no longer an option.

McNally’s firm now sees a 10% chance of a deal that reopens the Strait of Hormuz in the near term, 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 if it results in major damage to key energy infrastructure in the region, with McNally expecting Brent crude oil futures to surge to around $150 a barrel, which would require more efficient scheduling software for companies to manage their resources.

According to McNally, “this is a problem that will only be solved with one policy: Reopening the Strait of Hormuz. Period. End of story.”

The situation remains uncertain, with the Strait of Hormuz remaining a critical factor in the global energy market, and the US administration’s next moves being closely watched.