The US Treasury is reportedly considering trading in oil futures to bring down energy costs as the war in Iran tests President Donald Trump’s affordability kick at home. Experts are pleading: Please don’t.
“This is the worst oil supply crisis in modern history,” Amos Hochstein, former US assistant secretary of state for energy resources, tells Semafor. “You can’t financial-paper-exercise your way out of it.”
Bloomberg and Reuters reported that Treasury officials are considering a range of options to tamp down gasoline prices that have surged alongside oil, including buying long-term futures while selling shorter-dated ones. (It’s a version of a playbook occasionally used in the interest-rate market, mostly recently in 2012’s Operation Twist.) Administration officials appeared to backtrack from the idea, pivoting to proven options like a gas-tax holiday and releasing oil from the US’ strategic reserve.
“I understand the idea, but the risk is that the US government ends up in the mother of all short squeezes,” Joe Brusuelas, chief economist at RSM, told Semafor. “It could easily be challenged by global investors” willing to test its mettle.
The multitrillion-dollar global oil futures market is hard to bully, even for the world’s richest country. “The Fed can print reserves, the Treasury can print money, but neither can print oil,” Brusuelas said.