Executives from some of the leading U.S. oil companies have warned President Donald Trump’s administration that the energy price crisis caused by the war with Iran could worsen further.
THE WAR IN IRAN VS THE MIDTERM ELECTIONS
Although not exposed to the risk of a fossil fuel supply disruption, being the world’s largest producers, the United States is still affected by rising international crude oil prices, which impact fuel prices and ultimately the entire economy. Lowering the cost of living was one of Trump’s main promises, which he must consider ahead of the November midterm elections.
Essentially, Trump’s foreign policy is coming into conflict with his domestic policy, as the price of West Texas Intermediate (the benchmark oil contract for the American market) has surpassed $100 per barrel, while Brent (the European benchmark) stands at $105.8: since early March, these two contracts have gained over 40 percent, reaching the highest levels since 2022, the year of Russia’s invasion of Ukraine.
THE REVELATION OF THE WALL STREET JOURNAL
As revealed by the Wall Street Journal, last week the CEOs of ExxonMobil, Chevron, and ConocoPhillips met with several White House officials, including Energy Secretary Chris Wright and Interior Secretary Doug Burgum, to emphasize that the near-total blockade of the Strait of Hormuz will continue to fuel volatility in fossil fuel markets, pushing crude prices higher, reducing refinery profit margins, and – in the worst case – limiting the availability of raw materials for these plants.
THE REFINING ISSUE
As mentioned, the United States is the world’s largest oil producer. However, many refineries on its territory were built in a historical period prior to the so-called shale revolution of the late 2000s, when the country was still heavily dependent on oil imports. Consequently, these facilities were designed to process “heavy” and viscous crude varieties, which have very different characteristics compared to shale oil – the name given to oil extracted from shale rock – which is “light.”
It is no coincidence that last week Trump announced with some emphasis the imminent opening of the first new oil refinery in the United States in fifty years: it will be located in Texas, in Brownsville, will have a processing capacity of 160,000 barrels per day, and will be designed to process shale oil. Having a high refining capacity is essential to exert influence on the oil market: after all, consumers do not use crude oil but its derivatives, such as diesel and gasoline.
HOW MUCH IS GASOLINE IN THE UNITED STATES
Speaking of gasoline, prices in the United States are at their highest in about two years. According to the American Automobile Association, the average cost of a gallon of gasoline is $3.63, the highest since May 2024. When fuel prices rise, transportation costs also increase, and consequently the cost of goods: exactly the opposite of what the Trump administration wants.
WHAT EXXONMOBIL, CHEVRON, AND CONOCOPHILLIPS SAY
ExxonMobil CEO Darren Woods told the White House that crude prices could rise further with fewer barrels circulating on the market. Meanwhile, the heads of Chevron and ConocoPhillips, Mike Wirth and Ryan Lance, expressed concern about the extent of the crisis.
WHAT THE TRUMP ADMINISTRATION IS DOING
The Trump administration has developed a series of measures to promote the lowering of oil prices, including issuing a (temporary) license to purchase Russian hydrocarbons and the release of hundreds of millions of barrels from the strategic reserve. However, for the crisis to truly subside, the Strait of Hormuz must be “unblocked” quickly: the United States and Israel, therefore, will have to swiftly conclude their war with Iran, which is attacking ships passing through this waterway. But none of the parties involved seem open to compromise.
WHAT AMERICAN CONSUMERS THINK
Meanwhile, the gasoline price increase has contributed to lowering American consumer confidence (commonly called sentiment) to a three-month low: the preliminary sentiment index for March compiled by the University of Michigan fell to 55.5 points, compared to 56.6 in February.
Adding to the difficult picture are employment data: the latest reports from the Bureau of Labor Statistics (a government agency) indicate that job openings increased and layoffs decreased in January, but the hiring rate remained unchanged.
