Trump's Tax Cuts and Strategic Reserve Release Fail to Curb Oil Prices; Energy Price Pressure Before Midterm Elections Ultimately Depends on Middle East Situation

On October 9, as the U.S. midterm elections on November 3 approach, soaring gasoline and diesel prices are becoming a key economic challenge for the Trump administration. Despite a series of executive interventions from the White House, real constraints such as refining capacity, energy transportation, and global supply limit the effectiveness of these policies.

Reports indicate that U.S. diesel prices surged to a historic high of $6.52 per gallon in September, while gasoline prices rose from about $3 per gallon at the beginning of the year to over $4. Recently, Trump allowed the sale of dyed diesel, which was previously restricted to agricultural and construction use, and postponed the payment of related federal excise taxes, theoretically saving up to 60 cents per gallon. However, this is unlikely to fundamentally increase fuel supply.

The White House is also pushing for the release of strategic petroleum reserves and considering suspending the federal gasoline tax and limiting diesel exports. However, after previous releases, the U.S. strategic petroleum reserves are expected to drop to about 244 million barrels, leaving limited room for further releases; limiting diesel exports could lead to domestic tank saturation, reduced refinery operating rates, and even further impact gasoline supply.

CEO Mike Wirth warned that restricting energy exports will tighten global supply, and the U.S. cannot isolate itself from the international energy market.

Pricing manager David Ruisard estimated that about 60% of the pressure for rising U.S. diesel prices is related to shipping restrictions in the Strait of Hormuz, while the remaining 40% is affected by the impact of the Russia-Ukraine conflict on the refining supply chain. As Trump signals progress in negotiations with Iran and a temporary halt to military actions before the elections, Brent crude oil fell to $102.91 per barrel, while WTI crude dropped to around $90.40.

Analysts believe that tax cuts and the release of strategic reserves can only temporarily alleviate energy price pressures. If shipping in the Strait of Hormuz is disrupted and geopolitical risks in Eastern Europe persist, the Trump administration may struggle to push fuel prices down before the midterm elections.

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