Supermajors are set to report bumper profits for the second quarter thanks to the surge in oil and gas prices, driven higher by the hostilities between the United States, Israel, and Iran. This is a problem for governments—notably the Trump administration, but politicians in Europe are angry at Big Oil's good fortune again.
Oil prices soared fourfold earlier this year after U.S. and Israeli strikes on Iran prompted the latter to shut traffic via the Strait of Hormuz—something Tehran had been threatening it would do for decades but had never before actually done. The shock of this development gave oil and gas prices an initial kick, and the resulting production squeeze added momentum, sending Brent crude to over $100 per barrel. While oil prices never got as high as they were in 2022, governments around the world were generally in a weaker financial position than they were four years ago, making the situation more challenging.
In the United States, gas prices topped $4 per gallon as a result of the war, prompting warnings of a potential recession unless the conflict is resolved quickly. President Trump himself singled out Big Oil as the culprit for the high prices at the pump, blaming the industry for price-gouging and even ordering a federal investigation.
Related: People Are Talking About Contango While Oil Markets Are Far From Recovered
"The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil. Those prices are dropping like a rock! In other words, customers are being 'gouged'," Trump wrote on TruthSocial at the end of last month. "I have instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I'm seeing!"
In what looked like a barrage of warnings, the U.S. president also wrote, "Gasoline Retailers must get their Prices down, IMMEDIATELY! They're too high considering that Oil is now at $68 a Barrel, and heading south. The Retailers must quickly react to this statement, and do what they know is right — DROP YOUR PRICE FOR OUR GREAT AMERICAN PEOPLE!" In the same TruthSocial post, Trump told fuel retailers to "Start targeting around the $2.50 a Gallon number."
The industry has, naturally, explained that it does not have full price-setting power when it comes to retail fuel prices, which are closely linked to international crude oil prices—but not in full sync. A recent Energy Intelligence column provided an example of the relationship between retail fuel prices and crude oil benchmarks by noting how Ukrainian drone attacks on Russian refineries had squeezed the supply of diesel and jet fuel in one of the world's top exporter, prompting an increase in diesel and jet fuel production—and exports by U.S. refiners. However, boosting diesel and jet fuel production has inevitably resulted in less gasoline production and, as a result, higher prices, according to the author of the column.