U.S. President Donald Trump may consider emergency measures due to the sharp rise in oil prices. The conflict around Iran has already started to affect the global energy market.
Oil has risen above $100 per barrel. The White House fears that a prolonged rise in energy prices could hit businesses and ordinary consumers. In that case, the entire economy would feel the pressure.
The administration is currently discussing several possible actions. Some of them are intended to ease tension in the oil market.
There is also a political factor. High gasoline prices quickly become a problem for any government. Especially when elections are ahead.
In November, the U.S. will hold midterm elections. Republicans are trying to maintain control of Congress.
Strategic Reserves and Oil Exports Discussed
Among the measures being discussed is the release of strategic reserves from G7 countries. Such a step could temporarily add oil to the market and slightly ease the tension.
The list does not end there. Washington is also discussing restrictions on U.S. oil exports, possible intervention in the futures market, and partial suspension of federal fuel taxes.
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The Jones Act is being considered separately. Currently, it requires that fuel between U.S. ports be transported by ships under the American flag. Authorities are considering whether this rule can be temporarily relaxed.
All the measures have the same general goal: either add flexibility to supply or slightly lower fuel prices. How effective this will be is still unclear.
Pressure on Oil Producers
The White House is trying to ease tension not only with domestic measures. At the same time, Washington is negotiating with allies in the Middle East.
The U.S. wants Gulf countries to increase production. There is also talk of restoring supplies that were disrupted by the conflict.
A separate risk is associated with the Strait of Hormuz. About 20% of the world’s oil passes through it. Therefore, any disruption there quickly affects prices.
If tankers continue to experience interruptions, pressure on the market will intensify.
So far, the White House has not disclosed what decisions will be made. Trump is expected to speak Monday evening, but no specific steps have been announced in advance.
Analysts Doubt Effectiveness of Measures
Some energy analysts believe that even tough political decisions may not yield quick results.
The main problem remains the same. If tanker movement through the Strait of Hormuz is not restored, the market will experience a supply shortage.
In this case, oil prices may continue to rise.
The administration also discussed military escorts for tankers and insurance support for ships passing through the strait. But so far, this has not led to a noticeable increase in shipments.
What This Means for Markets
The rise in oil prices coincided with a difficult period for the U.S. economy.
Expensive energy quickly affects transportation and industry. Usually, this also pushes up prices for goods.
Markets react to such things almost immediately. Especially when price increases coincide with a geopolitical conflict.
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Fluctuations are already noticeable in commodity and stock markets. Cryptocurrencies are also moving more than usual.
Now investors are waiting for new signals from the White House. If the situation around Iran does not change, oil may remain expensive longer than the market expects.
