Trump's 'Oil Price Dilemma'

A gas price sign at a gas station in Washington D.C. on the 20th (local time)

Recently, I considered joining Costco, a warehouse discount store in the U.S., and eventually got a membership card.

I had been delaying joining due to the annual fee of $65 (approx. 96,000 won), but I was swayed by talk that "Costco gas stations have cheaper fuel prices than regular gas stations."

U.S. prices were always a burden due to tips added to every meal out and the high exchange rate, but there was a perception that gas prices, at least, were cheaper than in Korea.

However, the situation changed after the Iran conflict began in late February.

Gas prices in the U.S. continued to rise, exceeding $4 per gallon (approx. 1,400 won per liter) from under $3 per gallon (approx. 1,200 won per liter), and refueling became an expense that could no longer be taken lightly.

At the Costco gas station I visited last weekend, cars were lined up in a long queue.

The sight of consumers looking for cheaper gas stations to save even a few cents is not unfamiliar, but today's queues felt quite different from before.

This is because consumers' sensitivity to energy prices has increased significantly as international oil prices fluctuated due to the impact of the Iran conflict.

President Donald Trump has stated that Iran's blockade of the Strait of Hormuz would not significantly affect the United States, unlike Europe and Asia, which are highly dependent on the strait for energy transportation.

A gas station in Miami, Florida, USA

However, reality is moving in a different direction.

The global crude oil market is closely interconnected, and geopolitical risks from the Middle East are immediately reflected in global oil prices. The escalating tensions surrounding the Strait of Hormuz are not just a regional issue but a variable that shakes global supply chains.

Its impact is directly visible on gas station price signs across the U.S.

The problem is that such uncertainty is unlikely to be resolved in the short term.

Currently, the U.S. and Iran are maintaining a precarious truce. With the U.S. also expanding its maritime blockade targeting Iran, tensions in the Strait of Hormuz and surrounding waters are rising even further.

Even if military clashes cease, the prevailing forecast is that high oil prices will continue for some time.

U.S. Energy Secretary Chris Wright recently stated in a media interview, regarding when gasoline prices in the U.S. are expected to return below $3 per gallon, that "it could be the end of this year, or it might not be possible until next year."

For President Trump, this is also a political burden. With the November midterm elections approaching, rising inflation is the variable most acutely felt by voters.

Especially in the U.S., where reliance on private cars is higher than on public transport, gas prices go beyond mere economic indicators. Gas station price signs directly translate into household burdens, which are directly linked to consumer dissatisfaction and evaluation of the administration.

As rising oil prices stimulate logistics and production costs, driving up the prices of other goods, there is a high possibility of a broader spread of inflationary pressure.

In this regard, President Trump's hardline stance on Iran has an ironic aspect.

While a strategy to increase negotiation leverage through maximum pressure might be effective in the short term, it could also boomerang by exacerbating instability in the energy market and stimulating domestic inflation.

Ultimately, President Trump is expected to face deeper concerns between his diplomatic and security strategies and domestic economic and political burdens. Attention is focused on what balance he will find amidst the 'oil price dilemma' and how his choices will affect public sentiment in the midterm elections.