An attempt to blunt rising oil prices
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What are the factors driving the recent surge in oil prices?
How to Blunt the Rising Price of Gas. From Marketplace, I'm Sabri Beneshour, in for David Brancaccio. Israel attacked what's called the South Pars gas field off the coast of Iran. It's the biggest source of domestic energy for Iran, and Iran retaliated by striking major gas infrastructure in Qatar and Saudi Arabia. President Trump said the U.S., quote, knew nothing about the Israeli attack and threatened the Iranian oil field with more attacks if Iran continued its retaliation. Meanwhile, the price of oil surged to $115 a barrel. The price of gas here in the U.S. also continued to rise. Average is now $3.88, up almost a dollar from before the war. The Trump administration is trying to dull the impact on gas by suspending something known as the Jones Act.
It says any ship that transports cargo between U.S. ports has to be made in America and be U.S. operated. The White House is waiving that requirement for 60 days. Marketplace's Nova Sappho has more.
How does the Jones Act impact U.S. oil transportation?
The Jones Act was written to help maintain American shipbuilding and operating expertise. But over the years, U.S. shipbuilding has shrunk anyway. We now have less than 100 ships legally qualified to go from one American port to another and just 55 tankers. The shortage has raised shipping costs. Colin Grabo is a trade policy researcher at the Cato Institute. So waiving the Jones Act will certainly help. It will dramatically expand the universe of ships available that can be used to transport goods within the United States. More ships, lower costs. Grabo expects gasoline prices to decline in places like California, Florida, and the Northeast because those areas rely on ships instead of pipelines. But analysts say the decline will be just a few cents per gallon at most.
We know that the Strait of Hormuz is a critical choke point. So until the Trump administration is able to find a diplomatic solution to this conflict, I struggle to see how they can significantly decrease energy and gasoline prices for Americans. In the meantime, oil prices have blown through earlier predictions of how high they might go, underlining just how unpredictable the current outlook has become. I'm Novosafo for Marketplace.
What effects will waiving the Jones Act have on gas prices?
The war in the Middle East has made the Federal Reserve's job harder. Yesterday, it decided to leave interest rates unchanged. Where it goes from here is unclear. Marketplace's Nancy Marshall-Genzer has that. Fed Chair Jerome Powell used the phrase wait and see four times during his press conference yesterday. The Federal Reserve's next meeting on interest rates is about six weeks away. Powell says what happens in the Middle East will be a big factor next month, but he stressed that he doesn't know how that will affect Fed officials' thinking. Powell says they did run through a few Mideast scenarios, but... Just remember that we don't know, and we shouldn't assume it's going to be one thing or another.
We're going to see. Fed officials did release quarterly economic projections yesterday as scheduled. In spite of all the uncertainty, a graph known as the dot plot showed the Fed penciling in one interest rate cut this year. Fed officials' inflation expectations ticked up a bit. I'm Nancy Marshall-Genzer for Marketplace.
President Trump is delaying his trip to China that was scheduled for the end of this month, citing war in the Middle East. So where does that leave U.S.-China relations?
How is the Federal Reserve responding to rising oil prices?
Scott Kennedy is at the Center for Strategic and International Studies and is here to talk about it. Hi, Scott. Good morning. This summit between the U.S. and China is getting called off allegedly because of the war in Iran. Do you think that is, in fact, the real reason? That's probably actually the primary reason. I think the other reason is that the administration is really not prepared for a summit meeting with the Chinese. The negotiations have barely begun and they haven't reached agreement about very much. And so I think pushing the meeting back gives them time to actually try to cobble together a bigger deal. What is at the top of the list of economic issues between the U.S.
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Chapters
6 chapters
1
What are the factors driving the recent surge in oil prices?
0:01–1:05
2
How does the Jones Act impact U.S. oil transportation?
1:05–2:31
3
What effects will waiving the Jones Act have on gas prices?
2:31–3:53
4
How is the Federal Reserve responding to rising oil prices?
3:53–5:04
5
What challenges does the U.S. face in its relations with China?
5:04–6:01
6
How does the war in the Middle East affect U.S.-China negotiations?
6:01–6:58