Is the Trump team studying the impact of $200 oil prices? The White House denies it outright.

(Source: China Electric Power News)

Reprinted from: China Electric Power News

On Wednesday, a rumor regarding “the Trump team’s research on the impact of oil prices soaring to $200” once again caused many investors in the crude oil market to feel a sense of alarm, although the White House quickly denied it afterward…

According to sources familiar with the matter, Trump administration officials are assessing what impact an increase in oil prices to $200 per barrel would have on the economy, indicating that senior White House officials are studying the potential chain reactions of extreme scenarios arising from the Iran conflict. These individuals stated that modeling analyses of how significantly a sharp rise in oil prices could damage economic growth prospects is part of routine assessments during times of heightened tensions, rather than predictions.

They claimed that this move aims to ensure the government is prepared for all contingencies, including a prolonged conflict.

Sources also revealed that prior to the outbreak of war, U.S. Treasury Secretary Basant expressed concerns that the conflict would drive up oil prices and harm economic growth. In recent weeks, senior officials at the Treasury Department have been conveying their concerns about fluctuations in oil and gasoline prices to the White House.

However, White House spokesperson Kush Desai quickly stated that this claim is “not true.” He pointed out that “while the government has been assessing various price scenarios and economic impacts, officials have not discussed the possibility of oil prices reaching $200 per barrel, and Secretary Basant has not expressed ‘concern’ over the short-term disruptions caused by the ‘Epic Fury Operation.’”

Desai noted that Basant has repeatedly “conveyed his and the government’s continued confidence in the long-term trajectory of the U.S. economy and the global energy market.”

The White House also stated on Wednesday that although Iran has openly rejected President Trump’s proposal for negotiations and threatened further military action if an agreement cannot be reached, diplomatic efforts aimed at ending the war are still ongoing.

Iran’s threat of $200 oil prices is still fresh in memory.

It is worth mentioning that Iran had warned the U.S. back in mid-March about the possibility of oil prices rising above $200.

On March 11, a spokesperson from Iran’s Khatam al-Anbia Central Command stated that Iran is fully capable of blocking the Strait of Hormuz. The attempt by Western countries to suppress global oil and energy prices through external intervention is destined to fail. “Get ready for oil prices to rise to $200 per barrel, because oil prices depend on regional security, which you are undermining.”

Since the U.S. and Israel attacked Iran on February 28, oil prices have indeed risen significantly—although there is still a huge gap to the $200 mark. The global benchmark Brent crude oil futures have increased by nearly 40% since the outbreak of hostilities, trading at around $99 on Thursday.

If crude oil prices reach $200, it would undoubtedly have a massive impact on the global economy. When adjusted for inflation, oil prices have only reached this level once in the past half-century—just before the outbreak of the 2008 global financial crisis.

In fact, even if the increase in oil prices is not as extreme, the impact of high oil prices on the global economy should not be underestimated. A survey conducted last week showed that when asked how high oil prices would need to rise for the probability of a recession to exceed 50%, economists provided answers ranging from $90 to $200 per barrel, with an average of $138.

Trump has indicated that he is not worried about rising energy costs, even suggesting that it could be beneficial for the U.S., and predicted that oil prices would drop significantly once the war ends. However, transportation through the Strait of Hormuz has nearly come to a standstill—this strait typically carries one-fifth of the world’s oil and gas exports, and has already had a noticeable impact on the global economy.

European Central Bank President Lagarde stated last week that hostile actions in the Middle East have exacerbated inflation risks. The European Central Bank, the Bank of Japan, and the Bank of England are all likely to raise interest rates as early as next month. In the U.S., the most immediate effect is that retail gasoline prices have risen by 30%, erasing the declines of the past year—a decline that Trump had touted as a key economic achievement. As the Federal Reserve closely monitors the impact of rising oil prices on inflation, the outlook for its monetary policy is becoming increasingly uncertain.

A recent poll released by Ipsos this week revealed that due to soaring fuel prices and widespread public dissatisfaction with the war on Iran that he initiated, President Trump’s approval rating has now fallen to its lowest point since his return to the White House. Currently, only 36% of Americans approve of Trump’s job performance, down from 40% as indicated in the previous week’s poll.

Editor: Jiang Pengxin

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