The Trump administration's policy tools to curb oil prices are "nearly bottoming out."

On Friday, Bloomberg's energy and commodities columnist Javier Blas stated in an article that the Trump administration has very few tools left to suppress oil prices. Blas has long been engaged in the energy and commodities sector.

Blas believes that the power of the oil market is comparable to that of the bond market, and can similarly corner politicians. If the conflict drags on, high energy costs will force Trump to end the war quickly—not by his own choice, but driven by the market.

From the current situation, although oil prices have not yet broken the $100 per barrel mark, they are hovering near that line. Blas estimates that for each day of delay, oil prices will add an extra $3 to $6 on top of the benchmark price. After a week, that amounts to $15 to $30, and while it can barely hold for two weeks, beyond that, the global economy will begin to suffer real damage.

The more critical question is: what cards does the White House still have to play? Blas has outlined the existing policy options, and the conclusion is not optimistic. Short-term measures may buy a few days of breathing room, but none of the options fundamentally solve the problem. The only real way out is to reopen the Strait of Hormuz.

What’s Left in the White House's "Toolbox"?

Since the outbreak of the conflict, the White House has already used its most straightforward cards. Releasing strategic oil reserves and activating alternative pipelines to bypass the Strait of Hormuz—these measures have indeed provided some breathing space for the market, but Blas's judgment is that "this time is measured in days, not weeks."

What options are left? Blas lists them one by one: Congress could be asked to eliminate the federal fuel tax (the Biden administration did this in 2022), but legislation takes time and may not secure enough votes; states, especially those controlled by Republicans, could declare a fuel tax holiday; Trump could also waive certain environmental standards for gasoline and diesel. These measures might temporarily relieve pressure domestically, but they have no effect on the rise in international oil prices. A more extreme measure would be to impose an export ban on U.S. oil and refined products—this would indeed lower domestic prices but would cause global prices to soar. Blas directly commented, "This would be a huge mistake."

Another more sensitive option mentioned by Blas is direct intervention in the oil futures market. He said, "I believe the Trump administration has seriously considered this." In fact, the Biden administration also evaluated this option after the Russia-Ukraine conflict in 2022 but ultimately abandoned it due to high risks and low chances of success. This path is not only extremely dangerous operationally but also legally contentious.

The "Destructive Power" of Oil Prices Has Not Yet Fully Unleashed

Blas also provided a relatively calm reference point in the article: so far, the actual impact of this conflict on the global economy remains limited. WTI crude oil has not had a single closing price above $100 this year. In contrast, after the outbreak of the Russia-Ukraine conflict in 2022, WTI had nearly 83 consecutive days with closing prices above three digits. For oil prices to truly harm the economy, they need to remain at high levels for a considerable time—and that scene has not yet occurred From a finer dimension, the electricity market—the core battlefield of the 2022 European energy crisis—has shown almost no reaction this time. Wholesale electricity prices in Germany are even lower than they were a few weeks ago. Inflation expectations have also not changed significantly, and economic growth expectations in wealthy countries remain basically stable. Blas's judgment is: If the conflict ends in the next few days, the global economy may leave almost no memory of it by mid-year.

However, the market has also given a clear signal about how sensitive prices are. U.S. Energy Secretary Chris Wright mistakenly posted on social media that a tanker had passed through the Strait of Hormuz, causing oil prices to plummet by more than 10%. Although it was a false alarm, this moment clearly illustrates: Once the situation turns, prices can drop just as quickly. The problem is that the tanker did not actually pass through.

The Time Window is Closing

Blas mentioned in the article that Trump's initial expectation was that this conflict would last four to five weeks. Now, as the third week is about to begin, the costs at the energy level continue to accumulate, but he believes they are still within a controllable range. The real risk point is if the conflict drags into April and May.

Once that stage is reached, oil prices will soar to "stratospheric levels," and inflation pressures will fully erupt. But Blas believes the greater threat is not inflation itself, but growth. If the conflict extends from days and weeks to months, economists will have to start downgrading GDP forecasts, and the shadow of stagflation will truly loom over the globe.

From this perspective, the logic of the oil market is actually quite simple: if prices rise to a certain level, demand will naturally be destroyed—consumers and businesses will be forced to reduce oil consumption. However, the impact of this "demand destruction" varies depending on where it occurs. Blas candidly points out that if demand shrinks in a small country like Bangladesh (which already shows signs), the impact on the global economy is relatively limited; but if an industrial power like Germany starts cutting energy consumption, that is another matter—2022's European energy crisis has already provided a cautionary tale.

Ultimately, Blas's core judgment is: Trump must either end the conflict quickly or be forced to end it by the oil market. There is no third way. The scenes of cabinet members taking turns on television to "talk to" the market precisely indicate that the White House itself knows that the real tools to solve the problem are no longer in the toolbox.

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