Trump Keeps Trying To Reassure The Oil Markets. Some Analysts Think He May Be Making It Worse.

Energy experts say another oil price spike is coming — and it may be made worse by the president’s social media posts.

President Donald Trump has repeatedly spurred temporary dips in oil prices by claiming on Truth Social that the Iran war is near an end and that U.S. oil production would ensure sky high gas prices would soon retreat.

The jawboning has mostly worked. Even as the global price of oil has crept up over $100 per barrel on the futures market, it is significantly less than the $140 per barrel spot price, or what it would take to buy a barrel today.

But the president’s promises can only work for so long. Supply of oil — especially in Europe and Asia — is dwindling and a price shock is coming, said Dan Pickering, chief investment officer at Pickering Energy Partners.

He said that when the summer driving season begins there will be another gas price shock that “hits people in the face.”

“There’s a day of reckoning coming,” he said. “It will be painful because I can tell you that the stock market's ignoring this.”

Another spike in prices around Memorial Day could be a fatal blow to Republican chances for holding onto the House next year, as Americans’ confidence in the economy continues to drop.

Trump on Monday was reviewing Iran’s latest peace proposal, which arrived after he canceled his top negotiators’ planned trip to Pakistan for talks. He continues to maintain that a quick resolution to the war with an agreement to reopen the Strait of Hormuz is within reach.

And inside the White House, confidence remains high that markets will soon stabilize, despite U.S. gasoline prices having increased by more than $1 a gallon since the Iran war began, a major reason why the conflict is so unpopular with the American public.

Officials close to Trump are, for now, dismissing analysts’ warnings that the true global economic impact of the war has yet to be felt.

“Everyone feels like we can hopefully get back to even lower prices at the gas pump. That's always the goal,” said a senior White House official, who was granted anonymity to speak candidly. “It's always the indicator of how people feel about the economy, and generally, how well the economy is doing. So everyone is very sober about the uptick in gas prices, but everyone feels confident that we can get it down before the end of the year.”

Last week, Trump said gas prices would drop as soon as the war ends.

But Rosemary Kelanic, director of the Middle East Program at the libertarian-leaning Defense Priorities think tank, said the administration’s confidence that normalcy is just over the horizon is keeping American oil companies from producing more. Why, they say, invest in production when the war is about to end. The problem is if the war doesn’t end very soon there won’t be enough oil for the world, she said.

“By talking down the market so effectively, when the price spike becomes inevitable, it's going to hurt way worse because we'll have lost weeks or even months of time where producers could have been ramping up output,” she said.

Even some U.S. oil and gas industry executives are frustrated with Trump’s rhetoric, with one respondent to a recent Dallas Fed survey saying the president “sends conflicting signals to operators who cannot plan rigs and capital budgets when prices swing wildly based on tweets.”

That has created paper market prices that quickly rise and fall and the real world market, where prices largely just increase, the respondent noted.

“Our hypothesis is [that] the paper market is being manipulated,” the respondent wrote. “This will likely lead to an even worse supply and demand imbalance and higher prices in the medium term (next 12 months).”

A growing number of market analysts are reaching a similar conclusion. On Sunday, Citigroup revised upwards by $15 its expected average price for a global barrel of oil to $110 in the second quarter and $95 in the third quarter. But if the Strait of Hormuz remains closed through June, Citi forecasts a barrel of oil reaching $150.

White House spokesperson Taylor Rogers insisted that oil prices would soon drop after the conflict ends and noted that the U.S. is not reliant on the Strait of Hormuz for oil and gas supplies.

“The President brought oil and gas prices down to multi-year lows at record speed, and as traffic in the Strait of Hormuz normalizes, these energy prices will plummet once again,” she said.

Since the U.S. and Israel attacked Iran in February, much of the world has been using oil and liquefied natural gas loaded on tankers before the war broke out, supplemented by what’s in storage. But that will only last so long. Asia is already experiencing “steep declines” in storage, said Jenna Delaney, Rapidan Energy Group's Director of Global Crude.

“Global refineries have already cut runs due to challenges sourcing crude,” she said. “Refined product supplies are already strained at current refinery run levels, and demand typically rises in the summer.”

Oil inventories in some countries are days or weeks away from hitting “operational minimums,” Natasha Kaneva, head of global commodities research at JPMorgan wrote in a recent note to investors. That could mean parts of the global energy system start to collapse, refineries will struggle to operate, energy flows will bottleneck and more.

“The latter is already evident across Asia — particularly in middle distillates and jet — while the former is unfolding more quietly, masked by timing lags, floating storage dynamics and the uneven regional distribution of stocks,” Kaneva and a team of analysts wrote in the note.

To be clear, the U.S. is largely insulated from the most severe energy shocks because of its role as the globe’s leading producer of oil and gas.

And the White House insists that America’s record level of oil and gas production will cushion the hit to the U.S. economy posed by a global energy market that is just beginning to deal with the loss of so many barrels of oil now stranded in the Gulf.

“We're producing at historic levels, and now we're able to capitalize on that,” the senior White House official continued, adding that “tankers from all over the world are now pulling into American ports to fill up.”

And yet, in a best case scenario, it will be take longer than just a few months before gas prices settled to the level they were before the war, said Emma Anderson, author of “Oil, the State, and War: The Foreign Policies of Petrostates” and a senior fellow at the Stimson Center, a foreign policy research institute in Washington. The real impact on Americans will be inflationary and is likely already locked in, she said.

“Prices at the pump are going to go up over time,” she said. “The costs of goods are going to go up as diesel goes up. Shipping will get more expensive. Trucking will get more expensive. The things you buy at the store will get more expensive.”