Suppressing oil prices, the Trump administration's policy tools are "nearly exhausted."

``` On Friday, Bloomberg Energy and Commodities columnist Javier Blas wrote in an article that the Trump administration has very few tools left to suppress oil prices. Blas has long been deeply involved in the field of energy and commodities. Blas believes that the power of the oil market is no less than that of the bond market and can likewise corner politicians. If the conflict drags on, soaring energy costs will instead force Trump to end the war as soon as possible—not by active choice, but because the market leaves him no other option. From the current situation, although oil prices have not yet broken through the $100 per barrel mark, they are already hovering near this line. Blas estimates that for each day the conflict drags on, oil prices will add an extra $3 to $6 to benchmark prices. Over a week, that’s $15 to $30. Two weeks may still be bearable, but beyond that, the global economy will start to suffer real damage. The more critical question is: what cards does the White House still have to play? Blas reviewed the existing policy options one by one, and his conclusion is not optimistic. Short-term measures might buy a few days of breathing space, but none can fundamentally solve the problem. The only real solution is to reopen the Strait of Hormuz. What's left in the White House's "toolbox"? Since the outbreak of the conflict, the White House has already played its hand with the most convenient cards at its disposal. Releasing strategic petroleum reserves and activating alternative pipelines that bypass the Strait of Hormuz—these measures did buy the market a little breathing room, but in Blas’s view, “the time they buy is counted in days, not weeks.” What’s next? Blas lists the options: Congress could repeal the federal fuel tax (the Biden administration did this in 2022), but legislation takes time and there might not be enough votes; states, especially those controlled by Republicans, could announce fuel tax holidays; Trump could also grant exemptions from some gasoline and diesel environmental standards. These steps might temporarily relieve domestic pressure but do nothing to curb the rise of international oil prices. A more extreme move would be to impose an export ban on U.S. crude oil and refined products—this could lower domestic prices but would send global prices skyrocketing. Blas’s assessment: “That would be a huge mistake.” Blas also mentions an even more sensitive option: direct intervention in the oil futures market. “I believe the Trump administration seriously considered this,” he says. In fact, the Biden administration also evaluated this move after the Russia-Ukraine conflict in 2022 but abandoned it due to high risk and low odds of success. This path is extremely dangerous operationally and highly contentious from a legal standpoint. The "destructive power" of oil prices has not been fully unleashed yet Blas also offers a relatively calm point of reference: So far, the actual impact of this conflict on the global economy remains limited. WTI crude oil hasn’t closed above $100 a barrel on any day this year. By comparison, after the outbreak of the Russia-Ukraine war in 2022, WTI closed above $100 for nearly 83 consecutive days. For oil prices to truly hurt the economy, they need to stay high for a considerable period—which hasn’t happened yet. Taking a closer look, the power market—the core battleground of Europe’s 2022 energy crisis—has barely reacted this time. Germany’s wholesale electricity prices are even lower than a few weeks ago. Inflation expectations have not changed significantly and growth forecasts for wealthy countries remain basically stable. Blas judges: if the conflict ends in the next few days, the global economy might retain barely any memory of it by mid-year. But the market has given a clear signal of how sensitive prices are. U.S. Energy Secretary Chris Wright once accidentally posted on social media that an oil tanker had already passed through the Strait of Hormuz, causing oil prices to instantly plummet more than 10%. Although it turned out to be a mistake, it clearly showed that once the situation turns around, prices can fall equally fast. The problem is, that tanker never actually passed through. The time window is closing Blas mentions in his article that Trump’s initial expectation was for the conflict to last four to five weeks. Now, as the third week is about to begin, the energy costs continue to mount, but he believes the situation remains within a controllable range. The real risk point is if the conflict drags into April or May. Once that stage is reached, oil prices will soar to "stratospheric levels," and inflationary pressure will explode across the board. But Blas thinks that the greater risk is not inflation itself, but growth. If the conflict extends from days and weeks to months, economists will be forced to start downgrading GDP forecasts and the specter of stagflation will truly hang over the world. From this perspective, the logic of the oil market is quite simple: if prices soar high enough, demand will naturally be “destroyed”—consumers and businesses will be forced to cut back on oil usage. But where this “demand destruction” happens matters. Blas points out frankly, if demand drops in a small country like Bangladesh (where there are already signs), the impact on the global economy is limited; but if an industrial powerhouse like Germany slashes energy consumption, that’s a different story entirely—the European energy crisis of 2022 being a clear warning. Ultimately, Blas’s core judgment is: Trump either ends the conflict quickly, or is forced to do so by the oil market. There is no third way. Those scenes of cabinet members appearing on TV one after another to "talk to" the market just show that the White House itself is well aware that the tools to truly solve the problem aren’t in the toolbox anymore. Risk Disclosure and Disclaimer The market has risks; investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situation or needs. Users should consider whether any opinions, views or conclusions expressed in this article are suitable for their particular circumstances. Investment is at your own risk. ```