Following the initiation of a war with Iran by President Donald Trump on February 28, gasoline prices have spiked nationwide. Data indicates that prices have risen by more than a dollar per gallon in every state, with specific increases including +1.648/gallon (+58.6%) in Ohio, +1.612/gallon (+52.8%) in Illinois, and +1.37/gallon (+29.4%) in California. As of mid-April, the average price of gasoline in the U.S. neared $4 a gallon.
U.S. Navy Blockade of the Strait of Hormuz
The conflict has resulted in the closure of the Strait of Hormuz, a critical waterway through which 20% of global oil trade passes daily. On April 12, President Trump ordered a U.S. Navy blockade of the Strait. President Trump’s own Energy Information Agency administrator admitted on April 7 that fuel prices will continue to rise unless there is a solution to the closure. On April 14, Energy Secretary Wright stated, “We’re going to see energy prices high and maybe even rising until we get… meaningful ship traffic through the Straits of Hormuz.”
Strategic Petroleum Reserve Release of 172 Million Barrels
The Trump administration has pursued various measures to mitigate these costs. On March 11, President Trump ordered the release of 172 million barrels of oil from the U.S. Strategic Petroleum Reserve (SPR). According to Clayton Allen, a practice head at the global political risk research firm Eurasia Group, the release is “far too small to counter the Iran war’s impact on energy supplies.” Patrick De Haan, a petroleum analyst at GasBuddy, noted, The release won’t have much impact at all. It’s kind of like trying to replace a water main with a straw.
Jones Act Waiver and U.S. Development Finance Corporation Proposals
Additionally, on Wednesday, President Trump ordered a 60-day waiver of the Jones Act to allow foreign ships to move fuel between U.S. ports. A recent analysis from the Center for American Progress, a nonpartisan policy institute, estimates this action would reduce gas prices by 3 cents per gallon. White House spokeswoman Taylor Rogers stated that the administration is considering all the options on the table, including providing political risk insurance from the U.S. Development Finance Corporation to cargo ships in the Gulf and temporarily freeing up sanctioned oil.
Sable Pipeline Restart and Federal Investigations
The administration’s messaging has faced scrutiny. On March 8, Energy Secretary Wright told CBS’s Face the Nation, “We have a temporary period of elevated energy prices, but it will not be long. In the worst case, this is weeks — this is not months, and it leads to a better place.” By March 12, President Trump posted on social media that “when oil prices go up, we make a lot of money.” On March 15, Secretary Wright pointed to the Sable pipeline restart as an action to bring prices down. Sable promised that the project would “offer Californians immediate relief at the pump by making gas more affordable.” However, this project has been the subject of federal investigations and lawsuits by Sable investors regarding alleged efforts to mislead the public and investors.
Willy Shih, a professor of management at Harvard Business School and energy market expert, told CBS News, “The fundamental problem is that all these things they’re doing are measures to, ‘How do I counteract having taken 20% of the world’s supply off the market?’” Regarding the timeline for relief, Clayton Allen noted that physical constraints mean U.S. oil is not going to reach the market as quickly as expected, adding, “If people are expecting this to suddenly take us back to $3.50 gasoline, that’s not really realistic.” On April 12, President Trump acknowledged that gas prices “could be the same or maybe a little bit higher” by November.
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