President Donald Trump’s sanctions crackdown on Russia risks undermining one of the bright spots in the Trump economy: tame gas prices.
The surprising decision to punish Russia, the second-biggest crude oil producer on the planet, instantly sent oil prices surging Wednesday. Analysts say pump prices are likely to rise modestly in the coming days.
The challenge for Trump is how to break the Russian war machine without causing a painful price spike that would exacerbate lingering frustrations about the cost of living among voters.
“The market is reacting with shock today. Many thought Trump would never do this,” Bob McNally, founder and president of consulting firm Rapidan Energy Group, told CNN in a phone interview. “Once the shock wears off, we think prices will settle down. However, it’s a close call. There isn’t a lot of margin for error.”
Record-high gas prices haunted the Biden-Harris administration after Russia invaded Ukraine in 2022. And high prices across the economy helped propel Trump back to the White House.
Now, Trump is trying to force an end to that deadly war while keeping gas prices low. It’s a risky strategy.
“If Trump does anything that abruptly removes Russian oil exports, we would have an immediate explosion in oil prices,” said McNally, who worked as an energy adviser to former President George W. Bush.
Yet Trump has the advantage of operating from a position of strength when it comes to prices.
Up until the past few days, oil prices were trading near multi-year lows. Gas prices, as measured by AAA, looked destined to break through the psychologically important $3-a-gallon level.
“If you want to send a strong signal to Russia, now is exactly the right time to do it when prices are low,” said Dave Turk, who served as deputy energy secretary under President Joe Biden and is now a distinguished visiting fellow at Columbia University’s Center on Global Energy Policy.
This setup gives Trump some breathing room to crank up the pressure on Moscow in a bid to force Russian President Vladimir Putin to the negotiating table.
Trump credits his drill-baby-drill agenda — and it is true that US oil production is at all-time highs. But that world-leading oil output hasn’t changed much since Trump took office.
What has changed is willingness from OPEC and Saudi Arabia to pump lots more oil in a bid to regain market share lost to, among others, frackers in Texas.
“The confluence of events has enabled the United States to take a harder line with Russia,” said Andy Lipow, president of consulting firm Lipow Oil Associates.
But too hard of a line could backfire by driving up the highly visible cost of gasoline, which many Americans view as a proxy for the cost of living.
“It will be a calibrated effort to hurt Putin while protecting motorists,” said McNally.
GasBuddy’s Patrick De Haan expects gas prices to rise in the coming days, but only modestly from $3.07 a gallon on Thursday to $3.10 to $3.15.
“It’s not going to be earth-shattering,” De Haan told CNN.
McNally expects the Trump administration to try to thread the needle by making it harder — but not impossible — to buy Russian oil.
If China and others can keep buying Russian barrels, but at a significant discount to world oil prices, it could prevent a shortage that drives up prices for American consumers. But it would also punish Putin by shrinking the oil revenue that funds the Russian war machine.
Will it work?
McNally said the most likely scenario is that Russia keeps oil flowing at a steeper discount to Brent oil prices, but he cautioned there is a real risk that Moscow instead is forced to slash production.
“This is a close call,” McNally said.
The stakes are massive for consumers, the US economy and for the White House.
Polls already indicate voters feel Trump is not doing enough to address affordability. And that’s with low gas prices.
“If you want to remain in power, you’ve got to be laser-focused on affordability,” said Turk, the former Biden official. “That’s a big lesson I took away from the prior four years.”