Trump Team Weighed Range of Options for Oil Supply Disruptions

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(Bloomberg) — Trump administration officials considered a range of options in case of a major oil supply disruption in the Middle East ahead of the US strikes on Iran and President Donald Trump’s ceasefire declaration, according to people familiar with the matter.

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The odds of needing to employ those strategies diminished Monday evening after Trump announced that Israel and Iran had agreed to a tentative truce. 

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However, it was unclear Tuesday morning whether — and how long — that ceasefire might endure. Tensions remain high in the region that accounts for nearly a third of the world’s oil. 

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The discussion of potential interventions — described as beginning weeks before Saturday’s attacks — underscores the seriousness with which Trump and his top advisers are weighing the risk of strained oil supplies and higher prices. 

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Options that have been discussed include a potential release of some crude from the nation’s emergency stockpile, which can be done unilaterally or in concert with other nations in cooperation and the International Energy Agency, said people familiar with the matter who asked not to be named in order to speak candidly. 

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However, the Strategic Petroleum Reserve has been depleted to about 400 million barrels of crude, a little more than half its capacity after drawdowns under former President Joe Biden that were assailed by Trump and congressional Republicans.

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Analysts have warned even a strategic release of emergency crude would do little to offset the loss of millions of barrels flowing daily through the Strait of Hormuz, should its narrow shipping lanes be disrupted. 

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The president has made countering consumer prices a hallmark of his second term, and the cost of oil — as well as the gasoline and jet fuel made from it — is a key contributor to American household bills. 

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On Monday, Trump took to social media to implore: “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING!” The president aimed a second post at the Department of Energy, telling it to “DRILL, BABY, DRILL,” adding: “And I mean NOW!!!”

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By Tuesday morning, Trump was celebrating the fall in oil prices tied to cooling tensions in the Middle East and hopes the ceasefire would hold.

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“I love it. It dropped almost $10 yesterday,” Trump told reporters on Air Force One Tuesday morning. “We have a lot less conflict, so it came down.”

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The administration is using every tool available to maintain lower prices, increase economic and national security and sustain its energy dominance, a senior administration official said. While the administration isn’t currently seeing interruption to oil flows, the many tools at Trump’s disposal should offer reassurance, the official said.  

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Other options could include royalty relief for oil companies with drilling rights and wells on federal land, a bid to encourage them to bolster output. Waivers of fuel specifications like those previously employed by the Environmental Protection Agency after storm-related disruptions to domestic refining and shipments also could be on the table as a way to unlock the flow of gasoline and other refined fuels if necessary, the people said.