FACT CHECK: Is Trump To Blame For $3 A Gallon Gas?
Gas prices have jumped to almost $3 a gallon – the highest price since 2014. Thanks to Trump’s actions, Americans are paying more at the pump while big oil cashes out. pic.twitter.com/ccxqowNnh2
— Energy & Commerce Dems (@EnergyCommerce) June 6, 2018
“Gas prices have jumped to almost $3 a gallon,” read one tweet. “Thanks to Trump’s actions, Americans are paying more at the pump while big oil cashes out.”
Senate Democrats made similar claims in May. But is Trump truly responsible for $3 a gallon gas?
Oil and gas experts generally agree that production cuts to crude oil by Saudi Arabia and other oil-rich nations are the biggest driver for higher gas prices in the last year.
Trump’s withdrawal from the Iran deal did, however, create a certain amount of uncertainty in the oil market, and experts debate how big of an impact the decision had on gasoline prices.
As Americans headed into Memorial Day weekend, consumers nationally were paying $2.96 for a gallon of gas – 56 cents more than the year before.
Senate Democrats seized on the higher prices in a May press conference. “According to energy analysts and experts, President Trump’s reckless decision to pull out of the Iran deal has led to higher oil prices,” said Senate Minority Leader Chuck Schumer.
Democrats in the House tweeted out a graphic two weeks later that dubbed a rise in gas prices the “Trump jump.”
Thanks to Trump’s recklessness, Gas prices have jumped to almost $3 a gallon – the highest price since 2014.
Remember when Trump said “Gas prices are at crazy levels – fire Obama!” ? pic.twitter.com/KA7IPMl6Mq
— G. K. Butterfield (@GKButterfield) June 7, 2018
“Thanks to Trump’s recklessness, Gas prices have jumped to almost $3 a gallon – the highest price since 2014,” tweeted Rep. G. K. Butterfield.
The graphic implies that prices spiked after key policy decisions by the White House, mostly having to do with Iran.
The first spike came in March after two high-profile departures. Trump fired both his secretary of state and national security advisor within a matter of days, replacing them with “anti-Iran Deal” Mike Pompeo and John Bolton.
We asked analysts who follow the oil and gas market whether those two events could have pushed gas prices higher.
“That did have an impact on perception in the market. We did see crude oil trade higher,” Bill Baruch, president of the brokerage firm Blue Line Futures, told The Daily Caller News Foundation.
Trump had to waive oil sanctions by May 12 to keep the Iran deal intact, but as the date approached, investors grew more and more doubtful this would happen. Experts estimated that renewed sanctions could remove up to 1.5 million barrels of Iranian oil from the global market each day, and expectations over the shortfall drove prices up.
“The U.S. withdrawal from the JCPOA has been considered by the oil market as a risk and a bullish factor on prices for a while, especially since the new secretary of state and national security advisor replaced their predecessors,” Dr. Iman Nasseri, a managing director at FGE Energy, told TheDCNF.
By the time Trump withdrew from the deal on May 8, much of the uncertainty had already been priced into the oil market, and by extension, gas prices.
Some of the analysts we spoke to said that concerns over Iran were a significant reason why oil prices rose in the spring. But others disagreed. “Several other geopolitical risk factors were perhaps contributing much more to the market reaction,” said Nasseri.
More importantly, a decline in global oil production had already been rallying the market for the better part of a year.
Production in oil-rich Venezuela continued to drop amid years of mismanagement and chronic underinvestment, and a deal struck between the Organization of the Oil Exporting Countries (OPEC), Russia and other nations in December 2016 had reduced the world’s oil supply by 1.8 million barrels a day.
The price of crude oil, as traded on the New York Mercantile Exchange, bottomed out in June 2017 at $42.53 a barrel and then rallied $30 to a peak of $72.24 a barrel in May.
The cutbacks influenced the market well into 2018. OPEC decided in March to continue the production cuts, and in April, Reuters revealed that Saudi Arabia – the defacto leader of OPEC – might be targeting prices of $80 or even $100 a barrel.
The news appeared to prompt an angry tweet from Trump.
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!” he tweeted.
Oil prices rose on the heels of these developments, yet the graphic tweeted by House Democrats wrongly implies that Trump deserves full blame for rising gas prices.
The only other event cited in the graphic was an April 2 decision by the Trump administration to roll back Obama-era fuel efficiency standards for cars and light trucks. Experts told us, however, that while these regulations may influence gas prices in the long term, the decision did not cause prices to spike in the spring.
Analysts generally say that supply cuts, combined with a strong global economy, help explain a large share of the rise in oil prices.
“I think if you look at the entire length of the rally, the majority of the strength is from the reduction – the production cuts that have been in place since January of 2017, as well as improved demand from economic conditions we’ve seen over the last year,” Eugene McGillian, vice president of market research for Tradition Energy, told TheDCNF.
As far as what other factors deserve a big share of the blame is a matter of debate.
Most of the analysts we spoke to described the impact of Trump leaving the Iran deal as relatively minor. “Oil prices are influenced by countless variables, and in the grand scheme of things, the Iran-related headlines are a small part of the story,” Pavel Molchanov, a senior vice president at Raymond James, told TheDCNF.
One expert even called it “negligible.”
But analysts at Canary, an oilfield services company, say that Trump’s actions could have added as much as $8 to $10 to the price of crude oil. On a $30 a barrel rally, that’s a sizable premium.
McGillian similarly estimated geopolitical risk of $5 to $10 at the market’s peak. “The risk from the Iranian pullout was kind of like the final straw in the market’s last 10-month rally,” he told TheDCNF.
Oil prices have since come down from their high of $72 a barrel amid reports that OPEC may cover any Iranian oil shortfall once the U.S. reapplies sanctions in November. The White House has been working behind the scenes to convince the Saudis to increase oil production, but resistance from Venezuela, Iran and other OPEC members may thwart those efforts.
OPEC will meet on June 22 to decide about production levels.