The Trump administration’s waivers for Iran sanctions have had the most impact of any of the president’s actions to lower oil and fuel prices, according to the Energy Department, while his deregulation agenda has not moved prices much.
The administration’s waivers to allow countries like China to continue purchasing oil from Iran surprised the market by further collapsing the price of oil in November, according to the Energy Information Administration, the Energy Department’s analysis arm.
“Although implementation of sanctions on Iran began on Nov. 5, the United States granted waivers to some of Iran’s largest customers to continue importing limited volumes of crude oil for six months, which resulted in more crude oil available to the global oil markets than many market participants expected,” the agency said in its latest oil analysis.
But the Trump administration won’t be granting any new waivers once the current ones expire, said Brian Hook, the State Department’s special representative for Iran, who is visiting Gulf states this week to relay a message of strong opposition to Iran.
“We’ve been able to achieve a lot of economic pressure on Iran,” he told Bloomberg. “We want to deny the Iranian regime the revenue that it uses to destabilize the Middle East.”
The waivers were among three key factors the energy agency cited as responsible for a significant drop in oil prices and subsequent drop in gasoline and diesel prices in the U.S.
The top factor that led to the decline in oil prices since October was near-record crude oil production by the world’s three largest producers — the U.S., Russia, and Saudi Arabia.
U.S. oil exports have been driven by the private sector and the advent of shale oil on private land, coupled with the repeal of the Carter-era oil export ban in 2015.
Saudi Arabia boosted production ahead of Iran oil sanctions kicking in Nov. 5. Trump has taken credit for Saudi Arabia’s stepped-up production, touting his skills in persuading OPEC oil producers to increase production with strategically placed phone calls.
But Saudi Arabia and Russia have recently cut production after prices fell due to an oversupplied market threatening to harm their economies. The price dropped from near $90 per barrel in October to under $44 in a matter of a few weeks.
Now, they are creeping up above $50 per barrel, with the agency predicting $61 per barrel in 2019, and $65 per barrel in 2020, according to its short-term outlook issued Tuesday.
Most of the surge in production that sunk the price of oil was in reaction to Iran sanctions kicking in and producers trying to compensate for a lack of supply.
The U.S. actually became a net oil exporter for a short period in November, when the nation exported more oil than it imported for the first time.
The short-term forecast shows that net imports will continue to fall to an average of 1.1 million barrels per day in 2019 and to less than 0.1 million barrels per day in 2020.
The U.S. won’t be a full-time net oil exporter until the fourth quarter of 2020, around the time of the November presidential elections.
In addition to increased exports, oil prices have been affected by the uncertainty surrounding global economic growth, which has led to lower prices, EIA explained in its latest Week in Petroleum analysis, issued last week.
Trump noted Monday that he saw gasoline prices as low as $1.75 per gallon while driving to address a farm bureau event in Louisiana, taking credit for the low prices.
“That didn’t happen by accident, folks,” Trump said. “People think it does; it doesn’t.”
Trump is also using U.S. oil exports as a defense against media reports that he is working for the Russian government.
He suggested that U.S. exports are making it hard on Moscow by cutting into revenues from state-run oil companies that the Russian government relies on.
The U.S. government has no direct control over the rate of oil exports, unlike Saudi Arabia and Russia, which have more direct influence over their energy industries.
