Motorists are already on high alert for any changes to prices for gasoline at the pump as the U.S. conflict with Iran spreads beyond last weekend's air strikes.
There are quite a few actions the Trump administration could take to mitigate spikes in oil and fuel costs - with a tax "holiday," restricting U.S. crude exports and tapping the Strategic Petroleum Reserve among them.
What's already clear is that the jump in oil prices since the conflict began over the weekend has drivers "panicking" over a potential surge in gas prices, said Patrick De Haan, head of petroleum analysis at GasBuddy, on Tuesday.
"There's not really much you can do to limit the upside ... in gas prices when oil prices can't really be constrained," he said.
Since the U.S. and Israel's strikes hit Iran over the weekend, prices for oil have shot up. The current front-month May contract for global benchmark Brent crude (BRNK26) was up nearly 12% in that time frame through Tuesday, trading at $81.40 a barrel. U.S. benchmark April West Texas Intermediate crude (CLJ26) gained just over 11% to trade at $74.56.
Strait of Hormuz and the Navy
The spike in crude prices isn't lost on the White House. President Trump previously vowed to deliver $2-a-gallon gas to voters, and on Tuesday said the U.S. Navy might be engaged to keep keep global crude tankers flowing through the crucial Strait of Hormuz.
Trump said on Truth Social that if necessary, the U.S. Navy will "begin escorting" tankers through the strait as soon as possible to ensure the "FREE FLOW of ENERGY to the WORLD."
Tanker transit through the Strait of Hormuz has been nearly halted.
Meanwhile, the average price for regular gasoline has climbed by 5.6 cents a gallon from Monday to $3.117 Tuesday afternoon, according to GasBuddy. That's up 14.5 cents a gallon from a week earlier, but up by only 4.1 cents from a year ago.
The average U.S. price of regular gasoline has seen a noticeable climb since Sunday, GasBuddy data show.
GasBuddy's De Haan told MarketWatch over the weekend that gas prices could climb by as much as 50 cents a gallon by May.
A tax holiday or oil embargo
A temporary suspension of taxes on gasoline or the use of winter-grade gasoline, which is cheaper to produce, for a longer period might also be considered, as might the year-round use of gasoline with a higher amount of ethanol, which is also cheaper than regular gas.
Another interesting idea might be to apply an embargo on U.S. oil exports, according to Steven Blitz, chief economist at GlobalData TS Lombard.
From 1975 until the end of 2015, the U.S. Energy Policy and Conservation Act directed a ban on nearly all exports of U.S. crude oil. At the time, domestic oil production was falling and import volumes were rising, according to the U.S. Government Accountability Office. But domestic crude output roughly doubled from 2009 to 2015, partly due the boom in shale production, and in December 2015 the ban was repealed to allow free export of U.S. oil.
Recently, the Supreme Court struck down sweeping tariffs that Trump imposed on imports from certain countries, citing the need for authorization from Congress to implement them.
Blitz suggested there's still a possibility that the president could impose an embargo on U.S. oil exports under the International Emergency Economic Powers Act. The legality would be for the courts to decide, but IEEPA provides the president broad authority to regulate a variety of economic transactions following a declaration of national emergency.
If oil prices keep rising and "get stuck" at $100, Trump can consider an embargo on U.S. oil exports until the war is over, said Blitz. The idea may keep a lid on domestic prices, he said. "With this administration, to say it's a zero probability, that's a mistake," Blitz noted.
Some oil analysts, however, say banning exports would hurt East Coast refiners, most of which run exclusively on Brent crude oil. Part of the reason behind that is location; with the East Coast having limited pipeline access to U.S. onshore oil fields, it can be easier to transport oil by ship from Europe.
If the U.S. bans exports of its WTI oil, Brent prices would increase versus WTI, said Denton Cinquegrana, chief oil analyst at OPIS, with the price spread potentially jumping to around $15 a barrel. (OPIS is a unit of Dow Jones, the publisher of MarketWatch.) Brent currently costs almost $7 more than WTI. At the same time, U.S. inventories would swell and could slow production because there's no more available storage, he added.
Tom Kloza, an independent oil analyst, told MarketWatch that banning oil exports seems like an unlikely consideration. "That is a nonstarter for the entire industry, whether restrictions be for crude or refined products," he said.
SPR and fuel grades
As for other ways to keep gasoline prices in check, the Strategic Petroleum Reserve has been used before.
Back in 2022, President Joe Biden authorized the released of 180 million barrels from the reserve over six months - coinciding with a release of another 60 million barrels from the International Energy Agency after Russia's invasion of Ukraine led to a rise above $100 in crude-oil prices. The U.S. Treasury suggested the U.S. and IEA releases at the time may have lowered the price of gasoline by 17 to 42 cents a gallon.
Releasing oil from the SPR now would make sense only if the U.S. was looking to ship the crude to European or Asian allies, said Kloza. WTI crude sells at a discount to global prices, and the Trump administration has indicated it would rather add crude to the SPR rather than subtract from it, he noted.
Besides, Cinquegrana said a sale from the reserve is necessary because there's plenty of oil in the U.S. Domestic supplies rose by 16 million barrels for the week ended Feb. 27 and stand just 3% below the five-year average for the period, and domestic output set an all-time record high of 13.6 million barrels per day last year.
Temporarily, a gas-tax "holiday," a waiver allowing the use of cheaper winter-grade gasoline for longer, and year-round approval of the use of gas containing 15% ethanol (rather than just 10%) would also help lower the cost of fuel, said Cinquegrana.
But to really limit the rise in gas prices, GasBuddy's De Haan said the "elephant in the room needs to be addressed" - and that's rising oil prices.
The only way to "unkink the hose" and allow oil prices to fall would be for the Trump administration to look at securing the Strait of Hormuz - through military action or assurances of passage for ships, he said.
All other ideas are "Band-Aids on a much larger problem," said De Haan.
