War Paused for Now, But Economic Concerns Remain

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

U.S. military action in the Middle East paused again after mixed messages from the White House this weekend. President Trump's spokesperson, however, is concerned about energy and national security.

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Markets Plummet on War Pause

Commodity markets were taking a breather on Monday after U.S. military forces halted action in the Middle East, though the president is looking to shore up the nation's energy security ahead of the midterms.

White House press secretary Karoline Leavitt on Friday warned that Iran would "continue to pay," though President Donald Trump on Saturday walked back those comments, suggesting progress was made on halting the fighting that began in late February.

Markets have whipsawed. West Texas Intermediate, the U.S. benchmark for the price of oil, closed Friday at around $85 per barrel, but was down sharply Monday to move closer to $80 per barrel, despite ongoing regional tensions.

British maritime risk agencies sent notice of attacks during the weekend. Ambrey reported that a merchant vessel issued notices of an explosion near the coast of Oman on Sunday, while the United Kingdom Maritime Trade Operations (UKMTO) Center reported a vessel was struck off the coast of Oman on Saturday, suffering damage to its engine room.

At home, Industrial Info Resources in a weekly report on downstream activity found few major issues at the refinery level. Crude unit outages averaged less than 200,000 barrels per day (bpd) for the week ending July 31, according to IIR Energy.

And while crude oil prices are well below war-time highs of around $113 per barrel, gasoline prices remain stubbornly high. The price for Reformulated Blendstock for Oxygenate Blending (RBOB), the wholesale price for gasoline, is down around 8% since July 27, though retail prices remain elevated.

Travel club AAA put the national average retail price at $4.08 for a gallon of regular unleaded on Monday, up from month-ago levels of $3.82. Inflation, meanwhile, remains well above the Federal Reserve's goal of 2%, with the energy component of the Consumer Price Index showing a 15.7% annual increase to June.

"Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," the Federal Open Market Committee said last week after deciding to keep its lending rates unchanged.

Trump on Edge Ahead of Midterms

That might not be enough for a U.S. president facing depressing numbers in the polls. Against an unfavorable reading of his handling of the economy, 72% of U.S. adults responding to an Associated Press-NORC said it was important to keep a lid on domestic gasoline prices.

Last week, news outlets Politico and The Hill both reported that the White House is looking to reopen some oil refineries to help keep prices under control. He'd previously mulled a series of other steps, such as waiving the federal gasoline tax.

"(President Trump) would like to see refineries across the country reopen, especially the St. Croix refinery," a spokesperson told The Hill by email.

The St. Croix refinery in the Virgin Islands briefly restarted in 2020 but closed in 2021 after the U.S. Environmental Protection Agency warned it posed an imminent threat to public health. Industrial Info Resources data show the refinery, which was previously mothballed in 2012, had a peak processing capacity of 515,000 bpd, which would make it one of the larger plants of its kind in the United States should it return to service.

A spokesperson in comments to The Hill added it was important to keep refinery runs high for the sake of national security, adding "America's refining capacity is essential to ensuring the United States has continuous access to secure, affordable, and reliable energy."

National security, meanwhile, has prompted a shift in the U.S. refinery slate. With the risk of maritime travel still high in and around the Persian Gulf, regional producers are effectively shut in. Barrels arriving for U.S. refiners from the likes of Iraq and Saudi Arabia are scant, while data from the U.S. Energy Information Administration (EIA) show imports from Venezuela are up more than 9,000% year-on-year.

Canada, however, remains the dominant exporter, with its 4 million bpd on average accounting for about 60% of total U.S. imports, according to the EIA.

By the Numbers

• 72% of U.S. adults surveyed are annoyed by prices at the pump
• 15.7% year-on-year inflation for the energy component of the Consumer Price Index

Key Takeaways

• Markets wobble after more inconsistencies on Iran conflict from White House.
• Gasoline prices are not following the trends in global oil prices.

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).