PRESIDENT Donald Trump is the wild card in the oil markets today where energy geopolitics is in the lead. Before taking a formal direction, markets are awaiting his next move.

There is chatter that despite the campaign of “maximum pressure” against Iran, the US could extend some sanction waivers as the Trump administration would be seeking not to run up oil (and gasoline) prices too high — an issue with every American president, and a key issue for the current president, underlined Tsvetana Paraskova in a piece for Oilprice.com.

So believes, Bob Dudley, the chief executive officer of the British oil major BP. He is not ready to rule out the US could still grant waivers to a few buyers of Iranian crude. Markets are waiting for the ultimate cue from Washington, he insists. “I think the key – the wild card key — is will the US give some more waivers or not?” Dudley insisted.

“Now the US is saying they’re going to … take away those waivers again, and the oil price is clearly drifting up because of that, because of Venezuela, Libya’s got issues, so it doesn’t surprise me right now,” Dudley told CNBC, commenting on this year’s oil price rally after the 40 per cent plunge in Q4 2018.

President Trump is torn between the two ends.

An exclusive report from Reuters says that hawkish national security advisors convinced President Trump that ending all waivers for Iranian oil buyers would not result in a spike in oil prices and the time had come to exert that “maximum pressure” and cut off Iran’s oil sales. The US’s decision to send warships to the Middle East is also an ominous sign of a potential escalation in the conflict with Iran and a consequent spike in oil price.

US national security adviser John Bolton said last week that the US was sending a carrier strike group and a bomber task force to the Middle East to send a message to Iran that any attack on US interests would be met with “unrelenting force.” Bolton has always had a particularly hawkish stance on Iran, and reportedly rattled the national security establishment months ago when he requested they draw up plans for a military strike on Iran, Nick Cunningham wrote. Bolton, frustrated by his struggling regime change campaign in Venezuela, has seemingly turned his sights back to Iran, a perennial obsession of his.

But President Trump also cannot sustain high prices at gas stations. Despite the expressed expectation of the president that oil prices are ‘going down’, the US national average gas price, before going a little down, actually set a new high for the year at $2.88 last week. This average was nearly 20 cents more than a month ago and 63 cents more expensive than at the beginning of the year, the American Automobile Association (AAA) said. “Compared to the beginning of this year, motorists have definitely felt an increasing squeeze on their wallets at the pump,” AAA spokesperson Jeanette Casselano was reported in the press as saying.

Two factors pushing the oil prices higher, Iran and Venezuela, are the creation of this administration itself. President Trump is of the view that Saudi Arabia and the United Arab

Emirates (UAE) will step in and fill the gap after Iranian oil barrels come off the market. The Saudis however, are not rushing to ramp up production before seeing actual barrels off the market. The intensifying ‘war clouds’ in the region is also contributing to the upward momentum of the crude markets.

On Venezuela too, the Trump doctrine does not seem to be working. Venezuela has been a leading oil supplier to the United States but not anymore. Because of the US sanctions, American oil import from Venezuela has come to a grinding halt – tightening the markets further.

And thus, the Bull Run continues.

Trump, however, needs to bring down prices at gas stations. He has one tool in hand – ramping up the trade war against China. Last Friday, despite the ongoing deliberations, the US ramped up the trade war with China. The concerns about a conflict with Iran in the Middle East were offset by the perceived pitfalls to the global economy from Trump’s trade war on China.

And so, Mr Trump goes. If it results in economic instability and hampers global growth, indeed, who cares? After all Washington seems to have more geo-politically important issues — including Iran and Venezuela — to grapple with at the moment.

Published in Dawn, May 12th, 2019