Trump’s Inexcusable Unpreparedness for the Iranian Oil Crisis
At the time, there was speculation that tensions between the United States and Iran could escalate into military conflict – Mike Pompeo, then Trump’s secretary of state, called one of the Iranian attacks on Aramco facilities an “act of war.” The Columbia report considered various scenarios, including small-scale hostilities in the Gulf and a major war that would close the Strait of Hormuz and draw in other countries from the region. In this last scenario, the price of a barrel of crude could rise from 65 dollars to “110-170 dollars after one month, 95-125 dollars after six months”, indicates the report. The good news, the text continues, is that “neither side is interested in a massive escalation and has shown little willingness to do so, even as the crisis in the region has worsened.”
Enter Trump 2.0, whose confused mind seems to have difficulty keeping a thought in place for a few days, let alone the six years that have passed since the previous confrontation in the Gulf. A few weeks ago, in his State of the Union address, Trump noted that the price of a gallon of gasoline “reached a peak of over six dollars a gallon in some states under my predecessor — it was, quite honestly, a disaster.” Three days later, Trump signed the order for Operation Epic Fury, with eminently predictable results. After surviving the initial US-Israeli assault, the Iranian regime deployed an expanded version of its plan starting in 2019, exploiting its stranglehold on the strait, while launching missile and drone attacks on US bases and energy infrastructure in the Gulf states.
With the strait effectively blocked and hundreds of oil tankers stranded, several million barrels of oil are stuck at sea. And while onshore storage facilities have filled up, Saudi Arabia, Iraq and Kuwait have closed some of their wells because they have nowhere to store the oil they produce. In terms of volume, the impact on global supply is now the largest on record, energy sector analysts say, and the longer the conflict drags on, the worse it will get. In a conference call last week, Amin Nasser, Aramco’s chief executive, said a prolonged closure of the strait would have “catastrophic consequences” for global oil markets. Gas prices haven’t yet reached six dollars, but in some areas of California they have come close. Nationally, the average price rose from $2.94 a month ago to about $3.60, according to the American Automobile Association.
Last week, Trump floated the idea of the U.S. government providing insurance contracts to ships passing through the strait — a proposal that appears to remain in limbo. On Wednesday, the Paris-based International Energy Agency announced that its members, including the United States, other Western countries and their allies, would release more than four hundred million barrels of oil from their emergency stockpiles to ease supply disruptions – the largest release ever. Under the circumstances, it was a sensible move, but if the White House had hoped that it would immediately lower oil prices, it was disappointed. Despite the IEA’s announcement, the price of crude oil ended the day up almost 5 percent.
The last time Trump nearly fell into economic disaster was on “Liberation Day,” almost a year ago, when, from the Rose Garden, he announced punitive tariffs on dozens of U.S. trading partners. Financial markets, including the US bond market, which is the heart of the global financial system, quickly collapsed. Fortunately for Trump, two of his top economic aides – Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick – were able to persuade him to back down and suspend the tariffs before the bond market cracks turned into a full-blown crisis. Subsequently, many samples were modified. Thus, the legend of “TACO» – “Trump Always Chickens Out” – was born. (Robert Armstrong, journalist at Financial Timesfound the phrase.) On Wall Street, TACO still has many believers, and not without reason. Trump remains obsessed with the markets. And with the midterm elections looming, the last thing he and other Republicans want to talk about is rising gas prices.
