In month six of what was meant to be a six-week war, the Trump administration is steadily dialing down its war aims. What began as a quest for regime change in Iran became an effort to contain Tehran’s (“obliterated”) nuclear program, then destroy its missile capability, or at least defang the country’s regional proxies, or at the very least reopen the Strait of Hormuz, which was open before U.S. President Donald Trump started the war.
Now, U.S. Vice President J.D. Vance has a new, even more minimalist war goal: lower energy prices for U.S. consumers, which have spiked due to months of disruptions to global energy markets as a consequence of the war.
In month six of what was meant to be a six-week war, the Trump administration is steadily dialing down its war aims. What began as a quest for regime change in Iran became an effort to contain Tehran’s (“obliterated”) nuclear program, then destroy its missile capability, or at least defang the country’s regional proxies, or at the very least reopen the Strait of Hormuz, which was open before U.S. President Donald Trump started the war.
Now, U.S. Vice President J.D. Vance has a new, even more minimalist war goal: lower energy prices for U.S. consumers, which have spiked due to months of disruptions to global energy markets as a consequence of the war.
“That’s goal No. 1—keep oil and gas cheap for Americans all over our country,” Vance said last week, adding that “obviously goal No. 2 is ensure that Iran never gets a nuclear weapon.”
Trump quickly reiterated on social media that ending Iran’s moribund nuclear program remains the top priority, even though Washington and Tehran have reportedly had no discussions on the nuclear portfolio in months. Iran seems to be in little mood for further talks and is reportedly planning to escalate the conflict, potentially by making more strikes against regional energy infrastructure. Iran wants the Trump administration to comply with the terms of the memorandum of understanding that Trump signed in June, including $300 billion in reparations, an end to the U.S. blockade, and an end to U.S. sanctions.
Reining in pump prices that have risen by almost $1 a gallon since last year is an understandable political objective just months before the U.S. midterm elections; the Biden administration allowed oil prices to dictate much of the pace of its pressure campaign against Russia in the wake of the 2022 invasion of Ukraine. But the quiet part is not meant to be said out loud.
“Vance committed a truth. Sometimes the priority is the economic situation, sometimes the nuclear task, and sometimes the military task,” said Kevin Book, a managing director at ClearView Energy Partners, a Washington energy consultancy.
But curbing gasoline (and diesel) prices will be an uphill task, even if it is now among the White House’s priorities.
The Strait of Hormuz, the world’s most important energy chokepoint, remains sclerotic, with daily transits of ships remaining barely above single digits, down from more than 100 daily transits before the war. (And few of those ships, either inbound or outbound, are tankers.) It’s still a shooting zone: A vessel was attacked early Tuesday while attempting to leave the strait through the southern route. Continued attacks on shipping will do little to encourage shipowners to run the gauntlet, no matter how much Trump affirms that the United States has “total control” over the strait. Two big state-run Chinese shipping firms stopped sending tankers through the strait on Tuesday.
That means that at least 5 million to 6 million barrels of oil remain missing from global markets, as they have been every day since the war began. Meanwhile, oil inventories, both commercial stocks and strategic reserves, are dwindling, as they have for months. (Though U.S. commercial oil stocks showed an unexpected rebound last week.)
Global benchmark crude oil prices are back to more than $90 a barrel. Average U.S. gasoline prices are at $4.06 a gallon nationwide, up from $3.14 a gallon one year ago. The picture for diesel is even bleaker—$5.46 a gallon now versus $3.69 a year ago—which bodes ill just ahead of harvest season. The diesel “crack,” the spread between the price of crude feedstock and the refined product, broached $100 a barrel for the first time ever this week, a sign of how straitened refineries are.
There is a bottleneck, but it’s not just in the Strait of Hormuz. Global refinery capacity simply cannot cope with the requirements to process what crude oil is available to meet demand for gasoline, diesel, and jet fuel. U.S. refineries are running at 96 percent utilization rate—a record—and yet gasoline and diesel prices keep creeping higher. Next month, many are scheduled to go offline for seasonal maintenance, which will exacerbate the refinery crunch.
Add to that the loss of much of the world’s refinery capacity, in part due to Ukraine’s campaign of “long-range sanctions,” which involve drone and missile strikes that have knocked out a huge chunk of Russia’s refineries, and the lingering damage to Middle Eastern refineries from the brief shooting war in the Persian Gulf earlier this year. (That may also be intensifying: Yemeni news agencies report that the Houthis claim to have again targeted Saudi Arabia’s big Jazan refinery on Tuesday, though there was no confirmation.)
“There’s not a U.S.-only answer. It’s global. The cracks are huge everywhere, and lots of refineries are out,” Book said. “Even adding more crude oil won’t solve the problem, which is that refineries in Russia have been damaged by drones at the same time that refineries in the Middle East have been damaged by combat.”
There may be one answer, though it’s not a good one: Curtail the roughly 3 million barrels per day of U.S. exports of refined products such as gasoline and diesel. That is an idea that keeps cropping up and has since the spring, and it’s one that the White House keeps saying is not on the table. Curtailing those exports would, in the very short term, keep more refined products in the United States, which could lower pump prices in some places.
The problem with that idea, and the reason that oil companies have argued so hard with the administration against even considering it, is that it would be disastrous.
Ending exports from U.S. refineries, most of which are on the U.S. Gulf Coast, would lead to a glut of gasoline and diesel in that region. But it would be very difficult to ship those surplus supplies to other regions of the country. And with a profitable export stream cut off and a glut building, refiners would automatically throttle back their output, which would lead to even fewer refined products and higher prices. It would also pass the burden of higher energy prices to U.S. allies who have come to rely on huge amounts of U.S. energy exports to weather the disruptions in the Middle East.
“It’s a terrible idea. But terrible ideas in April could become options in October,” Book said.
