The global energy markets are rattled. Will the US economy follow?

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Hey, welcome back to the Politico Energy Podcast,

where we explore the stories and people shaping energy and climate policy.

I'm no more Michael, your Wednesday and Friday host and executive producer of the show.

Politico learned this week that the White House is scrambling behind the scenes to find

ways to keep gasoline prices from rising after the United States and Israel attacked Iran.

President Donald Trump's chief of staff is urging his advisors to come up with ideas to

bring prices down in addition to the two measures that he already announced. As we know,

the war in the Middle East quickly pushed oil prices higher and rattled global energy

markets, which matters politically, of course. The midterm elections are not too far away,

and rising energy prices and really any economic uncertainty could become a liability for the

President and Republicans. But if we zoom out just a bit here, this war in Iran is really just

the latest economic risk facing the United States since Trump took over. The President has spent

much of his second term pursuing policies that some economists have warned against,

and yet, despite all of those warnings, the broader U.S. economy keeps absorbing what Trump is

throwing at it. So the question is, even if this conflict continues to rattle the energy markets,

will it actually hurt the U.S. economy? And what does this all mean for the midterms?

That's what I want to talk about today with Politico's Deputy Energy Editor, Ben LaFave,

and Politico's Economics Correspondent and Columnist, Victoria Weeda. It's Friday, March 6th.

All right, Ben and Victoria, thank you both for joining the show today. Appreciate your time.

Happy to be here. Anytime. Glad to be here. So I want to start with you, Ben,

about what you reported yesterday, and then we'll get to the broader economic stuff.

What did you learn about what's going on behind the scenes at the White House right now,

when it comes to energy policy in this war in Iran? What we're hearing from the White House is

basically they're turning their attention to the pretty steep rise in oil prices and gasoline

prices that are resulting from the military action that the U.S. and Israel have taken an eye

around. When the shots started being fired on Saturday and the U.S. and Israeli military forces

killed the Iranian Supreme Leader, there was a sense that maybe this would be a quick one and

done military exercise, Trump was saying maybe a couple weeks, and there was a sense that no one

was really paying attention to the oil market. But since then, we've seen oil tankers,

kind of no one wanting to go in there, everyone kind of stalled out, and that's one of the major

thoroughfares for crude oil tankers. I mean, a lot of the oil that gets pumped in Saudi Arabia

or other places goes through the straight to get to the Persian Gulf to get to the wider market,

and prices just keep climbing. So the administration is now thinking, oh wait, we need to handle this.

So that's kind of what we've been hearing, basically a call going out to like stop what you're doing,

pencils down. If you're not working on the military aspects of this, get to work on the energy

part of this. So what are some of those things that are being floated or they're considering?

So to a certain extent, it seems like a lot of spaghetti is being thrown at the wall.

We're hearing a lot of ideas that may or may not ever make it past the drawing board.

Some of them we've heard are, you know, what if we have US military guarding energy sites

in the Middle East? Like we've already seen a couple of refineries, one in Saudi Arabia,

that has taken some fire, and basically they're going to stop producing fuel. And one of the ideas

is, well, what if we make it more difficult to take those out? The problem with that is I was,

you know, told is Saudi Arabia is not exactly keen to see more US troops on its soil. They've

obviously had problems with that in the past. Another idea we heard is, well, what if we suspend

the National Gasoline Tax, which is about 18 cents a gallon? Another seemingly easy idea to pull

off except they would need congressional approval. And there's also no guarantee that they can take

away the tax. There's no guarantee that the oil companies or retail gasoline stations would

pass the savings along to consumers. But I think that ideas like that show, you know, just

basically the administration is kind of considering anything to kind of bring down oil prices

and more importantly for the administration, given its effect on voters gasoline prices.

Yeah, so there was a real sense of urgency. And one thing that stood out to me in your reporting

was that the source told you that top Trump energy officials have really, you know, kind of taken

a back seat in this conflict since it started. What does that mean exactly and what does it say about

how the administration is prioritizing energy in this war? Yeah, source I talked to who had been,

you know, speaking with administration officials on the Monday said that basically that the war

hawks in the administration, the Marco Rubio, you know, Secretary of State Marco Rubio,

Secretary of War, Pete Hegsitt were the loudest voices in the room. The folks you would normally

expect to want to consider the implications of like 80 or 90 buck oil, you know, namely

energy secretary Chris Wright and interior secretary Doug Burgham, who's also, you know,

both of these guys are on the national energy dominance council. We're not speaking as loudly.

And I've heard different, you know, speculations on this. The administration says basically

everyone's got their brains wrapped around the energy issue and, you know, they're all cracking

down on it. But as we've seen, you know, they're doing other things. So the thought is maybe the word

on the need to have some sort of policy to tame the rise in oil and gasoline prices didn't go

out right away. Maybe fearing that, you know, the more people who know you're going to slam some

missiles into the Iranian Supreme leaders bunker, the more likely it might be to leak out before

the fact. So people, you know, got to have a need to know. So fair point, which is fair. So yeah,

it just seems that it is only now that they're actually turning their attention to GWTI. Just

hit 80 bucks a barrel gasoline is now at a higher price than it was when President Trump re-entered

office in January 2025. The White House did have a direct response to your story and they have

issued a couple different measures. Can you kind of talk about that in their rationale?

Yeah, they sent, you know, a long email basically saying political sucks. We've got plenty of ideas

on this that we have not, you know, made public yet. But they did make two public policy announcements

via President Trump's truth social account on Tuesday, one of which was we will provide backup

insurance to oil tankers who may be struggling with war premiums on their insurance right now.

The idea that is that, you know, as we see insurance companies saying,

gee, it sure is dangerous in the street of hormones. We're going to, you know, maybe not to cover

your policy. If you want to go in there, that basically uncle sugar will come to the rescue and

make sure the insurance stays there. The other policy they proposed was having naval ships escort

tankers through the straight as one oil company executive said, that just makes it sound like

we might have a bigger target on our back as far as their vessels are concerned. If the Iranians

are already taking pot shots at tankers, they might, you know, have an itchier trigger finger

if they might have a chance to take out an actual US warship alongside that tanker.

Got it. So, okay, my takeaway from you Ben is that behind the scenes and in public,

the White House is urgently considering or addressing energy prices, which is leading to economic

uncertainty, which leads me to Victoria. I want to turn to you because you put out this column

yesterday that basically said, yes, the energy markets are rattled in the short term that could have

economic consequences at home. And yet, every time the president has made an economic gamble as

you put it in the last year, the broader US economy has remained okay. Yeah, it's been pretty

remarkable because if you think about, I mean, you know, the tariffs obviously being the big one,

you know, we now essentially have a 10% baseline tariff on goods around the world and then there's

obviously other tariffs that are on top of that on other on some other things. You know, there's

been a lot of chaos and and hiccups and ways that that has fed through the economy that have hurt

sort of micro ways. But on a macro level, the economy is doing pretty well. And, you know, as you

mentioned, this particular war, I mean, when people talk about the oil market, the number one

risk scenario that people would talk about is war with Iran. We now have plunged headfirst into

this conflict. And, you know, oil prices are definitely up, but they are not close to triple

digits yet. I mean, I think there's still a question as to whether we might get there, probably

depends on the extent to which there's actually damage to energy infrastructure. Markets, you know,

we've seen some reaction. It seems like the biggest impact is that, you know, as it relates to

the yields that are paid on US government debt that feed into everything else, they're going up

because investors think, okay, you know, the US government's going to be spending a bit more

money, so we're probably going to have a bit more debt. And then also, we might have slightly

higher inflation, which might mean that the Fed is going to keep rates higher than the otherwise

would be. But overall, not anything that's going to freak people out. And this is something that I've

been hearing from business executives today is, you know, the economy seems like it for now is going

to be okay. I was going to ask, if this war is prolonged four to five weeks, do you think that

changes things? Do you think, and do you think there's a world where prices continue to go up and

that there is like a trickle down effect on the average consumer here in the US and yet the

overall economy maybe remains okay as you were kind of talking about? Is there a scenario like that?

Yeah. So the duration of this war is definitely the biggest question from an economic standpoint.

Obviously, overall as well, but from an economic standpoint, the duration is the question because

if Iran sort of runs out of the ability to keep causing the same kinds of disruptions in the

straight up, or moves that Ben was talking about, I mean, we could see oil prices come back down,

and this is maybe just a blip. Whereas if this is maybe a more sustained month's long disruption,

then you're probably more likely to see a bigger economic effect. And if there is sort of more

serious damage, then we could see an actually really big increase in oil prices that starts to cause

big problems. And I should note, you know, I was talking about how the US economy seems like it'll

whether it just fine, but actually there are some pretty big risks globally, particularly in Europe,

but they are at much bigger risk to a jump in oil prices. And so we'll also perhaps see the global

economy slow a bit, which can affect the US, but the US is also a pretty self-sufficient economy.

Yeah, I want to kind of close on this note. I mean, this is obviously an election year,

as the midterms are not too far away. And a lot of the political conversation pre-war was about

affordability and rising prices at home. So I guess what does everything we kind of talked about

mean for the midterms and kind of the politics of this situation? I mean, you know, lower gas prices

is something that President Trump talks about a lot. And so losing that talking point, you know,

I don't know in terms of as people are weighing what their vote is going to be in November,

whether gas prices are like their top concern, but the problem with gas prices is that there's such a

visible price, right? Like there's no other price that you're literally like as you're driving by,

you see it, like even if you're not buying gas, if you drive by a gas station, you know roughly what

gas prices are, right? So I think that that's something that sort of reinforces to people of like,

oh, wow, things are expensive, which is already like a feeling that has been around in the economy

for years now. And so it's definitely something that can sort of erode the Republicans' efforts

and really any incumbents' efforts to try and say we're addressing your affordability concerns.

Yeah, can you talk about that piece of it more like in your column, you kind of make the distinction

of like the economy can be doing well, but the president's polling and the perception of what he's

doing might not reflect that. Yeah, so I mean, President Trump's polling has been really poor on

the economy, especially for him, right? Like historically, economic issues are the thing that people

associate as one of Trump's positives. And you know, particularly in his first term, right?

Like the economy was quite good and people also felt good about the economy, which is kind of

the last time that happened ever since the pandemic, people have felt pretty bad about the economy.

Right. It goes to show that like, you know, even if the macro economy is doing well at the

micro economy, if people keep feeling like there are these, there's ways they're getting

poked by by the administration's policies. I think tariffs have also been somewhat visible,

particularly to small businesses or people who are employed by companies that import.

So I do think that even though the economy has held up, that's also a big drag on public opinion.

I was going to add, usually, you know, fuel analysts, the folks who look at fuel prices

and political factors will say, you know, it's kind of like when you see four, the number four

in front of your gasoline price, that's when folks start paying attention. But also it's, you know,

it's not just the number, it's the trend. If prices are going up and, you know, Trump can't come

out or a GOP candidate can't come out and say, yeah, prices are falling or prices are low.

If the Democrat can come back and say, hey, they're rising, that just kind of leads itself to the

messaging this situation, especially when the administration's not really settled on a message

of why they're doing this. So I think the danger is with the administration's making these

military actions and not, they're not showing, they're not communicating exactly what the outcome

they want to be. So it's like, how do you plan? Like, how do you know we're getting closer

to this thing ending? It's the idea that, you know, so even if they have an objective and they,

they can, you know, they say mission accomplished we're out of here is Iran going to stop shooting

at ships. So as long as this is all out there, the dangerous, you know, the dangers out there,

prices are going to keep rising and that's the direction I don't think the GOP wants to see.

All right. I think we'll leave the conversation there. Ben the Fave and Victoria Guita, thank you

for joining the show. Appreciate your time. Thank you, normal. Thank you.

All right, that's it for Politico Energy. For more news on energy and the environment,

subscribe to our free newsletter, PowerSwitch, and subscribe to Politico Pro to read our morning

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and follow our show on Apple's Spotify or wherever you get your podcasts. I'm Nirmal Malikal,

and we'll see you back here on Monday.

A nation isn't just built, it's powered by people like us,

in 2024 Chevron increased its U.S. production nearly 20% to help keep energy reliable.

Since 2022, we spent $44 billion with local suppliers supporting good jobs across all 50 states.

And this year, we're planning to invest about $10.5 billion in American energy projects

to help build the future right here at home. We put in the work because America depends on it.

Learn more at chevron.com slash America.