The Trump Administration wants to take a hard line on Iran, while avoiding a spike in oil prices just before the midterm elections.
If there’s one thing a politician in power hates to see, it’s oil prices rising ahead of an election. This is why we have seen prior administrations attempt to manipulate oil prices leading up to elections. For example, previous presidents have released oil from the Strategic Petroleum Reserve in an attempt to moderate oil prices prior to elections.
This is a situation President Trump has faced over the past year. In the summer of 2017, the price of a barrel of West Texas Intermediate (WTI) crude oil was still in the mid-$40s. This summer, it reached the mid-$70s, a one-year rise of more than 50%.
One factor behind this rise has been the hard line the Trump Administration has taken on Iran. As recently as April of this year, Iran reportedly exported more than 2.6 million barrels of crude oil per day. Iran is one of the world’s Top 10 crude oil exports, accounting for nearly 5% of global crude oil exports in 2017.
The Trump Administration has targeted Iran’s oil industry with sanctions, warning countries against continued purchases of Iranian crude oil. But this strategy is bound to cause an increase in oil prices unless the oil market has plenty of spare production capacity.
Saudi Arabia has sought to reassure the world’s oil markets that it could make up for the loss of Iran’s oil exports, but many analysts are skeptical that they can easily do so. This is especially true considering the ongoing implosion of Venezuela’s oil industry and the resulting decline in that country’s oil exports.
Hence, the Trump Administration is in the difficult position of wanting to tighten the screws on Iran, while at the same time avoiding an oil price spike. So, as the November 5th date loomed for countries to eliminate oil imports from Iran, the Trump Administration blinked.
