Energy dominance? Trump鈥檚 strategy hits a wall in Iran.
In Venezuela, President Donald Trump showed the potential of his energy dominance strategy. In Iran, he has run into its limitations.
The key flaw: While the United States is safe from the threat of an oil cutoff, it is not insulated from the sharp rise in oil prices. As a result of the war with Iran, gasoline prices have skyrocketed for U.S. consumers. A gallon of regular unleaded gas, which cost $2.98 a gallon on the eve of the war, now costs $4.14, according to AAA.
That nearly 40% rise is squeezing consumers seven months before key midterm elections, when political control of the House, especially, is up for grabs. A surge in gas prices alone might not sway elections. But coupled with the unpopular war in Iran and a sluggish economy, it is making Republicans nervous.
Why We Wrote This
President Donald Trump鈥檚 energy strategy faces limits as the Iran war spikes U.S. gas prices, squeezing consumers and threatening Republican prospects in the midterms. He must now choose between escalating the war and backing down, risking both image and oil prices.
All this puts Mr. Trump, whose energy dominance strategy aims to maximize oil, gas, coal, and nuclear output to drive growth and national security, between a rock and a hard place.
In theory, energy dominance allows the president to end U.S. military action whenever he wants, even if that leaves Iran in control of a strategic waterway known as the Strait of Hormuz, through which a fifth of the world鈥檚 oil passes. That move might prove a huge blow to American prestige, but aside from the pinch of higher gasoline prices, the energy-independent U.S. economy would continue to roll along.
Or President Trump can escalate the war, with a key goal being to ensure an open strait. This might extend a volatile, high-stakes conflict that has already whittled away some of his support since it began over five weeks ago.
鈥淎merica is in a different place than anywhere else: There is abundance,鈥� Roger Diwan, a senior vice president of S&P Global Energy, said at a Houston energy conference last month. 鈥淚t allows the U.S. a lot of room to maneuver, but also, I think, [makes it] a little bit oblivious to what鈥檚 happening in the rest of the world.鈥�
Big oil-supply disruption
Energy-dependent nations are now looking at what the International Energy Agency 鈥渢he largest supply disruption in the history of the global oil market.鈥�
Several nations, especially in Asia, are so dependent on Middle East oil that they face outright shortages if the Strait of Hormuz remains closed. Those nations include big, developed countries such as Japan, South Korea, and India.
When Mr. Trump first proposed the idea of energy dominance in a 2016 campaign speech, the U.S. was transitioning from an energy-dependent to an energy-independent economy. By the end of his first term, America had achieved that, thanks to the nation鈥檚 fracking of shale deposits. Mr. Trump envisioned using that newfound independence as a geopolitical tool.
He called his notion 鈥渆nergy dominance,鈥� though the term鈥檚 definition was always hazy. In a paper last year, Sara Vakhshouri, founder and president of the energy consulting firm SVB Energy International, defined it as 鈥渁 vision to position US energy as a source of stability, competitiveness, and international leadership.鈥�
Now, that definition seems to be broadening, she wrote in an last month. 鈥淚t appears to involve control over energy assets, strategic chokepoints, and the global energy flow.鈥� That control involves critical minerals as well as oil and gas.
Recent events appear to reinforce that interpretation.
In the first 13 months of his second administration, President Trump has pushed to take over Greenland, rich in critical minerals. He successfully captured Venezuela鈥檚 president, Nicol谩s Maduro, and convinced the remaining leadership to sell its oil to the U.S. Then, he initiated a war with Israel against Iran, which had the potential to build a nuclear bomb, but also was selling its oil at a discount to U.S. foe China.
Testing Trump鈥檚 energy dominance strategy
The action in Venezuela, which involves an oil supply deal of 50 million barrels with that nation鈥檚 remaining government, has succeeded in shifting the flow of its oil toward the U.S. rather than to rivals, such as Cuba. The administration might have hoped to do something similar with Iran.
Energy dominance 鈥渋s about the energy for affordability at home to power our economy, to win the AI [artificial intelligence] arms race,鈥� Doug Burgum, U.S. secretary of the interior and head of Mr. Trump鈥檚 new National Energy Dominance Council, said at last month鈥檚 energy conference in Houston. 鈥淏ut it鈥檚 also about the ability to sell to our friends and allies, so that they don鈥檛 have to buy from adversaries that are funding wars or funding terrorism against us.鈥�
But the Iran war so far has not worked out that way.
Instead, Iran is now largely blocking the strategic Strait of Hormuz, gasoline prices are up, and at press time, the U.S. had bombed Kharg Island, the key export terminal for Iran.
If Mr. Trump is serious about escalating the war until the strait is opened and Iran complies with U.S. demands, the benefits to world consumers, including American motorists, could be immense, supporters say.
Venezuela and Iran 鈥渉ave about 5% of daily energy production, and yet, they have about 30% of the world鈥檚 reserves,鈥� U.S. Sen. David McCormick said at the Houston conference. 鈥淵ou can imagine as these countries, hopefully, become a little more pro-Western regimes and are able to bring in private capital, that鈥檚 going to be great for the energy market.鈥�
Critics, however, see far more peril than potential in the escalating conflict.
鈥溾�楨nergy dominance鈥� was always a ridiculous US slogan, but now it has become a dangerous one,鈥� Robin Mills, chief executive of the consulting firm Qamar Energy, and author of 鈥淭he Myth of the Oil Crisis,鈥� wrote last month in an for The National, based in Dubai, United Arab Emirates.
Mr. Trump鈥檚 鈥渨ar in Iran has ensured this dominance will be brief and the fall hard.鈥�
