What measures can Trump take to respond to energy prices? Strategists share their opinions

Investing.com - The Trump administration has begun outlining potential measures to address rising energy prices related to the Iran conflict, but Wolfe Research analysts say the government’s policy tools may be limited.

Get oil market research and commodities insights on InvestingPro

In a report led by Tobin Marcus, Wolfe Research states that recent government announcements focus on measures aimed at stabilizing shipping and oil markets.

Marcus pointed out that the government has proposed establishing a government-backed maritime insurance program to encourage oil tankers to pass through the Strait of Hormuz.

According to Wolfe Research, given the authority of the U.S. International Development Finance Corporation, the plan appears legally feasible.

Marcus wrote, “The question of whether he can do this is answered with ‘yes’.” He noted that the agency has broad powers to provide insurance or reinsurance against political risks, including war.

However, the firm warns that the effectiveness of the plan will depend on whether private shipping companies are willing to rely on it.

Wolfe Research stated, “Is this enough to reassure maritime industry participants to truly pass through the Strait of Hormuz? We are not so sure.” The company added that implementation would take time.

Apart from maritime insurance, Wolfe Research believes that if oil supply disruptions worsen, there are few strong policy levers available.

Possible measures include releasing U.S. strategic petroleum reserves, adjusting biofuel policies, or temporarily suspending gasoline taxes, although the latter requires congressional approval.

Overall, Marcus believes market outcomes are more likely to depend on how the conflict itself develops rather than economic policy responses.

The report states, “We expect energy price impacts will be more influenced by battlefield dynamics than by economic policy responses.”

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.