With oil prices floating around a near 52-week high, there isn’t a lot
of ready supply just floating around, and the market is increasingly
sensitive to any indication that availability could be further cut by US
government action.
Unfortunately, this matters because the Trump Administration is very interested in taking actions that would greatly reduce the amount of oil, which they are already limiting, that is coming out of Iran and Venezuela.
The administration is following what seems to be usual US sanctions
reasoning, which is that if the United States has a problem with that
country, they aren’t allowed to sell oil anymore, ad woe betide anyone
caught buying that oil.
In early May, the waivers the US gave to some nations to keep buying
Iranian oil are set to expire, and the administration is talking up the
idea of renewing less of them, or potentially none of them, with the
ultimate goal of “exports to zero” for Iran.
With Iran exporting roughly a million barrels of oil a day, however,
that threatens a massive disruption on the global markets, fueling a
price hike everywhere, and potentially giving the administration the
political headache of rising gas prices within the US.
Officials would blame a price hike on Iran, naturally, but despite all
the rhetoric, the rest of OPEC simply isn’t in a position to make up the
difference, nor necessarily has the inclination to do so. The US making
dictating global oil commerce a centerpiece of their foreign policy is
simply running up against practical limitations, as they can only
control supply, and not demand.
So Trump campaigned on & won, in part, because of his recognition of the economic harms that have befallen his base, and then proceeds to actively harm them in the form of higher gas prices because of some axe to grind with Iran & Venezuela, which the base could presumably care less about…
One way or another, gas prices will keep going up. We should be taxing gas enough to actually maintain our roads and bridges in a safe condition, plus building sustainable infrastructure for when the fossil fuels are pretty much gone.
Picking unnecessary fights with certain oil-exporting nations only increases the power of the remaining oil exporters like Saudi Arabia… which may in fact be the entire point. But guess who is the #2 nation after the Saudis in net oil exports..? Russia.
There are many ways to handle this, and gas prices going up is the one way that puts the most pressure on the bottom of our economic pyramid, while push money to the top. Oil producers make a premium, while the money comes from those who commute to work in lower paying jobs from lower rent areas in older cars.
The discussion is not complete without consideration of the US magic option, of increasing Saudi production to make up for what the US removes from the market.
The US has used up that option. The Saudis dare not go much higher, for fear of damage to their oil fields and damage to their economic future. For them, the time line extends far beyond the US power play of the moment.