WASHINGTON: U.S. Energy Secretary Chris Wright said on Thursday that oil prices are unlikely to reach $200 a barrel, with President Donald Trump touting U.S. gains from higher prices as the war with Iran disrupted traffic through the Strait of Hormuz.
With the U.S.-Israeli war on Iran widening, two crude tankers blazed in an Iraqi port after a hit by suspected Iranian explosive-laden boats, while scores of other oil-laden ships remained stranded with the strait still shuttered.
Oil prices jumped more than 9% to nearly $100 a barrel.
“I would say unlikely, but we are focused on the military operation and solving a problem,” Wright told CNN when asked if prices would reach $200 a barrel – a level that an Iranian official said prices could hit if the war further escalates.
Wright’s use of the word “unlikely” was a veiled concession that a spike to $200 was possible, though he repeated that the price jump would be weeks not months.
Brent oil hit all-time highs in 2008 of around $147 per barrel, on tension between the West and Iran over its nuclear program, a weak U.S. dollar, and inflation fears.
This time, analysts say, oil prices could remain high because of the strait’s unprecedented shuttering. Iran’s new Supreme Leader Mojtaba Khamenei said on Thursday the strait should remain closed as a pressure tool.
“Get ready for the oil barrel to be at $200 because the oil price depends on the regional security which you have destabilized,” Ebrahim Zolfaqari, the spokesperson for Tehran’s Khatam al-Anbiya military command headquarters, said on Wednesday.
Wright told CNN: “We’re in the midst of a significant disruption in the short term to fix the security of energy flow for the long term.” The administration was focused on “pragmatic solutions … to get through these few weeks of tight energy supply,” he said.
US military ‘not ready’ to escort tankers through Hormuz Strait: energy secretary
The Trump administration is considering waiving a shipping rule known as the Jones Act temporarily to ensure energy and agricultural shipments can move freely between ?U.S. ports, the White House said on Thursday. Waiving the rule would allow foreign ships to ?carry fuel between U.S. ?ports, potentially lowering shipping ?costs and speeding deliveries.
‘We make a lot of money’
Trump wrote in a social media post: “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money.” He said he was more focused on stopping Iran from having nuclear weapons.
On Wednesday, Trump urged oil companies to travel through the strait despite the risks. “I think they should use the strait,” Trump said. Asked if Iranian mines were in the strait, he added: “We don’t think so.”
Wright told CNBC on Thursday that the U.S. Navy cannot escort ships through the Strait of Hormuz now but it was “quite likely” that could happen by the end of the month.
As many as 150 US troops wounded so far in Iran war, sources say
Oil jumps despite record draw
On Wednesday, more than 30 countries in the International Energy Agency agreed to the biggest-ever coordinated drawdown of global oil reserves of 400 million barrels, about 40% of which will come from the United States.
The war has forced Middle East Gulf countries to cut total oil production by at least 10 million barrels per day, about 10% of world demand. The IEA said on Thursday that is the biggest oil supply disruption in the history of the global market.
The U.S. will release 172 million barrels of oil from the Strategic Petroleum Reserve, which Wright on Thursday said would be swapped with more than 200 million barrels that will be put back in the reserve within a year.
Wright told CNBC the energy shortages were less likely to affect the United States and other Western Hemisphere countries. “There’s no shortage or even really tight oil market in the Western Hemisphere. The issue’s in Asia.”
U.S. gasoline prices continue to spike 13 days into the war at an average of $3.60 per gallon, according to AAA. Rising oil prices are also likely to boost the costs of other goods, with the closed strait also stalling shipments of fertilizer ingredients and likely raising prices on household items that could hit consumers for months.
Trump had campaigned on lower gasoline and other prices, with Americans set to vote this November in midterm elections that will decide whether his fellow Republicans keep control of Congress.
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