The Washington Post reports:

Oil and gas executives have warned the White House that gasoline prices could surge in coming months as fuel inventories fall to critical lows, complicating the Trump administration’s efforts to contain inflation that has already rattled American consumers.

Industry officials say they are doing everything they can to sound an alarm that prices are about to soar as the commercial and government inventories that have mitigated price rises so far are rapidly depleting, according to multiple people familiar with the conversations, who spoke on the condition of anonymity for fear of retaliation from the administration. Some inventories could be wiped out within weeks, the executives have warned, coinciding with the peak summer travel season.

“I have absolutely no doubt the White House — from the president on down — is fully aware of the nearly universal alarm among oil companies and analysts about the direction of travel for oil prices this summer,” said Bob McNally, who was an energy adviser in the George W. Bush administration and founded the research firm Rapidan Energy Group.

The warnings underscore the rising political and economic risks confronting President Donald Trump as the conflict with Iran drags into its fourth month, with little indication that a diplomatic breakthrough is imminent, despite periodic White House predictions of progress.

Already Trump’s administration is confronting the highest rate of inflation in three years, which has led to a significant drop in his standing among voters and deepened concern among Republicans about widespread losses in the midterm elections, which could cause them to lose control of one or both houses of Congress.

The Labor Department’s consumer price index rose at a 4.2 percent annual pace in the year ending in May, driven by surging gas prices.

Trump has publicly brushed off concerns about the rising prices. “I love it. I love the inflation,” Trump told reporters Wednesday when asked about the new figures. Oil prices will drop “like a rock” once the war concludes, he said.

Industry executives suggest otherwise.

The war with Iran has snarled the Strait of Hormuz, the waterway that transported about one-fifth of the world’s oil and natural gas supplies before the war. Trump has repeatedly sought to assure the public that he is close to a deal to reopen the strait, but that has not happened.

Senior oil executives who typically avoid making alarming projections in public have been doing exactly that.

“We’re sounding the alarm on these inventories going to record lows,” said American Petroleum Institute CEO Mike Sommers on “Mornings with Maria,” a Fox Business program that Trump frequently watches. “We should be concerned about what prices we’re going to see over the next few weeks. We have to solve this problem in the Strait of Hormuz.”

Industry officials, who spoke on the condition of anonymity to avoid antagonizing the White House, said the administration’s reception to their worries has been mixed. Some officials, they say, are taking the posture that the warnings are hollow. Prices have not shot up toward $200 a barrel, despite warnings since the war against Iran started in late February that they would quickly head there.

The U.S. Strategic Petroleum Reserve has dropped to 349.2 million barrels, approaching a multi-decade low last seen in 1983. The exact date reserves start to run dry can be difficult to calculate, because they cannot be run all the way down.

Millions of barrels of oil need to remain in pipelines and refineries to keep the systems from breaking down. Analysts and industry executives warn the critical moment could come anywhere from the end of this month to closer to the end of summer. But they are universally anxious about how quickly the supply is declining.

Industry models show the collapse of crude inventories within a matter of weeks could push the cost of oil up by 50 percent or more — sending the price of gas at the pump soaring past $5 per gallon. Oil executives worry that will send the administration scrambling to impose emergency measures like restricting the export of U.S. fuel. [Continue reading…]