Secondary authorization lifted on Russian oil, exemption from "Jones Act", massive oil release: United States strikes energy "combination punch" to cool oil prices.

As the Middle East war continues, the United States has issued a second authorization, allowing buyers to receive Russian oil shipments that are already in transit at sea. This move aims to alleviate the constantly rising oil price pressure. US Treasury Secretary Benson said on social media that this measure is intended to be a "precisely designed short-term measure" and stated that it "only applies to oil that is already in transit and will not bring significant financial benefits to the Russian government." It is reported that this measure only applies to oil loaded before March 12th and is an expansion based on the one-month waiver given to India last week. The previous waiver applied to crude oil loaded before March 5th. Benson had previously suggested that the US could "unblock" more Russian oil to ease the pressure on the oil market prices. Earlier on Thursday, Benson said that any measures taken by the US that benefit Russia would be "unfortunate" and only short-term. He said, "We hope this will be a very brief period in which Russia can benefit." Robin Brooks, a senior researcher at the Brookings Institution, said on social media, "If oil prices spike again, for example, due to increased attacks on oil tankers passing through the Strait of Hormuz by Iran, the pressure to relax sanctions on Russia will further increase." The Trump administration has been seeking measures to curb soaring crude oil and fuel prices. Among other options, the Trump administration is preparing to provide a 30-day temporary waiver for the Jones Act. The law requires ships transporting goods between US ports to be built in the US and operated by US crew. If the waiver is implemented, foreign oil tankers will be allowed to participate in domestic energy transport in the US, helping to transport fuel from the Gulf Coast and other areas of the US to East Coast refineries. Sources say this potential measure aims to increase domestic fuel transport capacity in the US, thereby alleviating the pressure on energy price increases caused by geopolitical conflicts. Additionally, on March 11th local time, the US Department of Energy stated that Trump has authorized the department to begin releasing 172 million barrels of crude oil from the Strategic Petroleum Reserve next week in response to the oil price increase caused by US and Israeli airstrikes on Iran. According to the planned release rate, the delivery of this batch of crude oil is estimated to take about 120 days. On March 11th, the International Energy Agency issued a statement saying that 32 member countries unanimously agreed to release 400 million barrels of strategic petroleum reserves to address the tightening global oil supply caused by US and Israeli military strikes on Iran. However, this largest-ever coordinated release of reserves did not calm market concerns. In his first statement since taking office, Iran's Supreme Leader Ayatollah Khamenei said that he would not give up revenge and that the Strait of Hormuz would remain closed. As of the time of drafting, Brent crude oil is still close to $100 per barrel. US gasoline prices rise to the highest level in over 21 months The rise in international oil prices has significantly transmitted to the prices of gasoline in the US. On March 11th local time, the latest data from the American Automobile Association (AAA) showed that the average price of gasoline in the US rose to $3.58 per gallon, the highest level in over 21 months. The data showed that US gasoline prices rose by 38 cents in the past week and 64 cents in the past month, the largest weekly and monthly increases since March 2022. The current oil price has increased by about 22% compared to a month ago. Due to the blockade of the Strait of Hormuz, which has prevented Asian refiners from obtaining key crude oil supplies that typically pass through the waterway, some refiners are considering reducing crude oil processing volumes. Meanwhile, US refiners are also transitioning from producing winter gasoline to producing more expensive summer gasoline, a shift that typically drives up gasoline prices in the spring. Gasoline prices are one of the most tangible indicators of inflation perception for Americans. Although overall prices are still lower than the historical peak of over $5 per gallon after the outbreak of the Russia-Ukraine conflict in 2022, the rapid increase in US gasoline prices is already setting off market alarms. The rapid rise in gasoline prices not only shakes the core political commitment of Trump to curb inflation but also casts a shadow over his economic agenda as the midterm elections approach. Analysts say that the continued rise in oil prices could have a negative impact on the Republican Party in the November midterm elections, where the two parties will compete for control of Congress. Voters are already dissatisfied with the high cost of living and Trump's economic governance. Expectations for Fed rate cuts cool down More importantly, the soaring oil prices are at odds with Trump's core goal of reducing government borrowing costs. Trump has persistently urged the Federal Reserve to cut interest rates, one of the deep-rooted reasons being to alleviate the burden of approximately $1 trillion in federal debt annually. However, the rising oil prices are exacerbating concerns about inflation rebound, not only suppressing market expectations for Fed rate cuts but also pushing up US Treasury yields. Although the US February CPI data released on Wednesday was in line with market expectations, showing stable price trends, this data did not reflect the impact of the oil price surge triggered by the Middle East situation. It is widely believed that the inflation transmission effect of significant fluctuations in energy prices may gradually appear in CPI data in the coming months, becoming an important uncertainty factor in the US inflation trend. As energy prices rise and inflation fears intensify, market expectations for Fed rate cuts are noticeably cooling down. Traders have largely abandoned expectations of an early rate cut this summer. Before the outbreak of the Middle East conflict, the market generally expected the Fed to cut rates by 25 basis points in June, possibly cut rates again in September, and even implement three rate cuts within the year if economic conditions allow. This expectation was based on factors such as a cooling job market, falling inflation, and the upcoming appointment of a new Fed chairman. According to data from the CME's "Fed Watch" tool, the market at that time generally believed that monetary policy would gradually shift towards easing. However, with the escalation of the Middle East situation pushing up oil prices, market expectations have significantly changed. Investors generally believe that in the background of energy prices potentially further boosting inflation, the Fed will still prioritize controlling inflation in the short term. Economists at Goldman Sachs said in a report released on Wednesday, "A higher inflation path will make it more difficult for the Fed to start lowering rates in the short term." The institution has pushed back its forecast for the next rate cut from June to September but still expects the Fed to cut rates at least once by the end of 2026. Some market participants have a more cautious view. Based on the latest pricing in the federal funds rate futures market, traders have virtually ruled out the possibility of a rate cut in September, only expecting a rate cut in December. At the same time, expectations for further rate cuts have been pushed back to 2027 or even early 2028.