White House admits few options as oil hits $109 and diesel sets records ahead of midterms

Brent crude surged to $109 a barrel on Monday — its highest level since May — while diesel prices hit a record $6.23 to $6.32 per gallon and regular gasoline averaged $4.32, according to AAA. Inside the White House, the response to those numbers is, by the accounts of people close to the administration, something close to helplessness.

The problem is there's not too much they can do about it. It's a global market, it's a global oil supply.— Stephen Moore, former White House economic adviser

Moore, who described the mood inside the administration as one of deep frustration, told Politico that officials are 'still looking for magic bullets.' A separate outside energy adviser told the outlet that the administration's narrow ability to influence prices is the chief driver of anxiety coursing through the building, with November's midterms drawing closer.

The price spike is the product of overlapping crises. The Iran war, now in its eighth month, has severely restricted oil flows through the Strait of Hormuz. A key Saudi East-West pipeline was forced offline last week following drone attacks. A second major energy chokepoint has come under tighter control by an Iranian-backed group. And Ukrainian strikes on Russian refineries have disrupted diesel production — though Trump claimed on Truth Social Monday that Ukraine had agreed to stop hitting Russian energy targets, a claim Ukrainian President Volodymyr Zelenskyy swiftly denied, saying no such agreement had been reached.

Ukraine has agreed not to hit Russian Energy targets. Russia has agreed to do likewise. The World's Diesel price rise is mostly caused by the Russia/Ukraine War, not Iran.— President Donald Trump, Truth Social post

The administration's public posture is that the pain is temporary. Interior Secretary Doug Burgum, speaking at the G20 energy minister summit in Dallas, acknowledged prices were elevated but called it a short-term disruption, drawing a contrast with what he described as the Biden administration's strategic push away from fossil fuels. Burgum drew that distinction in his own words: 'This is a temporary disruption instead of a strategic direction of the prior administration.' Trump made the same argument in a series of Truth Social posts, writing that oil is flowing through the Hormuz Strait and demanding that other countries eventually reimburse the United States for its role in the conflict.

The mood in the White House is 'frustration they can't get this resolved.'— Stephen Moore, former White House economic adviser

According to Moore, high energy prices function as a 'tax on the economy' and have started to overshadow administration wins such as growth in retirement savings and stock market performance. White House spokesperson Taylor Rogers rejected the notion that the administration is at a standstill, saying 'President Trump remains committed to unleashing American energy dominance, cutting costs, and putting more money back in the pockets of hardworking American families.'

The supply picture offers little near-term relief. U.S. strategic reserve crude inventories have fallen to their lowest point since the early 1980s, according to OilPrice.com. The cushions that kept prices relatively contained through the spring and early summer — strategic reserve releases, Chinese demand destruction, and ships quietly slipping through the Strait of Hormuz with transponders off — have largely been exhausted. China has eased its restrictions on fuel exports and resumed buying more crude, with imports rebounding from a decade-low seen in June.

The refining sector is adding its own pressure. U.S. refineries have been running at close to 95 to 98 percent capacity for roughly six months, according to multiple sources. A power outage struck ExxonMobil's Joliet, Illinois, refinery on Sunday, and the facility is not expected to return to full output before the week's end. ExxonMobil spokesperson Liza Steger said the company is assessing both the refinery's condition and the root cause of the outage. An unnamed source within the organization warned the incident illustrates how vulnerable diesel costs are to further increases.

It's not normal for refineries to run at 95 plus percent utilization for [six] months, and then when our inventories of diesel are lower than they normally are, any additional trip in that system is just going to have a much bigger price pop than it otherwise would normally.— Unnamed ExxonMobil official

The administration has explored invoking the Defense Production Act to increase U.S. refining capacity, according to the Daily Beast, but the sector's near-maximum utilization limits how quickly additional output could come online. Energy Secretary Chris Wright said the Saudi East-West pipeline would resume operations 'very soon' but declined to give a specific timeline, adding that he expects a 'rapid increase' in oil and refined product flows from the Middle East in coming weeks and anticipates U.S. refiners will boost production through biofuel blending requirements.

The economic stakes extend well beyond the pump. Record diesel prices translate directly into higher costs for goods and freight across the supply chain. Patrick De Haan, head of petroleum analysis at GasBuddy, warned that 'record diesel prices will impact every cargo, shipment, every delivery Americans are taking, and are likely to reignite inflation up and down the supply chain.' He advised Americans to 'anticipate a costlier holiday season.' Those same record prices have sharply lifted the probability of a Federal Reserve rate increase: as of September 10, traders on the CME FedWatch gauge placed the odds of a 0.25-basis-point hike at the Fed's next meeting at 72.4 percent, up from 49.4 percent just one week earlier.

Goldman Sachs Chief Economist Jan Hatzius told Yahoo Finance that the bank currently projects about 1.5 percent GDP growth in the second half of the year, but said that figure 'does not build in another major shock.' The bank places 12-month recession odds at 15 percent, down from 30 percent at the start of the conflict in March — but Hatzius cautioned that another significant price spike would push that figure back up. The conflict has already added more than $100 billion to what Americans have spent on gasoline and diesel, with the typical household absorbing more than $750 in extra costs, according to Brown University's Iran War Energy Cost Tracker, as reported by the Daily Beast.

Politically, the pressure is acute. According to a CBS News/YouGov poll, 54 percent of likely voters said they would back the Democratic candidate in their congressional district if the election were held today, versus 46 percent for the Republican. On CNN, Republican strategist Doug Heye offered a blunt assessment: 'Republicans know that their back is against the wall.' Former Pentagon chief Leon Panetta warned this month that the war could drag on for at least another six months, according to the Daily Beast — a timeline that would carry energy prices deep into the election cycle.

Republicans know that their back is against the wall.— Doug Heye, Republican strategist

The CNN source material offers a longer-range perspective: despite predictions from analysts that oil could reach $150 or even $200 a barrel during the Iran war, Brent crude never settled above $115 and U.S. oil never reached $113. Factors that kept prices from surging further included record pre-war oil inventories, a 400-million-barrel release from IEA strategic petroleum reserves, demand destruction — particularly in China — and ships quietly moving oil out of the Persian Gulf with transponders off. The IEA projects that once the Strait of Hormuz fully reopens, a production ramp-up from OPEC members and others could generate a global oil surplus of about 5 million barrels per day next year. That longer-term relief, however, offers little comfort to an administration facing voters in November.

Why it matters — Record diesel prices ripple through the entire economy — raising costs for goods, freight, and food — while the White House's admitted lack of short-term options means Americans are likely to feel the squeeze through the November midterm elections and possibly well beyond.

Sources differ on Whether Ukraine agreed to stop striking Russian energy targets: Trump claimed on Truth Social that Ukraine agreed not to hit Russian energy targets and Russia agreed to do likewise (irishstar.com) vs Ukrainian President Zelenskyy swiftly denied the claim, stating no such agreement had been reached (irishstar.com)

Reported by politico.com, irishstar.com, thedailybeast.com, oilprice.com, cnn.com