‘No good options’: GOP’s midterm hopes suffer under energy inflation

President Donald Trump's war in the Middle East for months has thwarted GOP plans to run on pocketbook issues this fall.

Now, with the midterm elections a mere weeks away, it's likely too late to stem the political fallout from the sustained grind of expensive energy bills that threaten to spread to other consumer prices.

More than six months into the war, the White House has no clear way to tame crude prices that have jumped nearly $30 a barrel and diesel prices that started breaking national records last week, analysts said. While prices for gasoline and oil hit higher peaks in 2022, the pain from energy costs has become a persistent drain on voters' wallets and could soon lead to an increase in their borrowing costs.

In the meantime, higher energy prices and tariffs are hitting GOP candidates in Michigan, Maine and Iowa particularly hard, said Republican campaign strategist Alfredo Rodriguez. Voters tend to have short-term memories, but gas station signs offer plenty of reminders, he said.

"The increasing price of diesel is going to have an effect on how voters pull the levers in those races," Rodriguez said. "We have 56 days left until Election Day. The cake is already baked."

The rise in oil prices driven by Iran's constraints on oil tanker traffic through the Strait of Hormuz has been one of the big reasons prices keep rising. And that inflation might push the Federal Reserve next week to do exactly what Trump doesn't want them to do: hike interest rates.

Even if prices cool, the damage to consumers is mounting. Unless diesel and oil prices make a dramatic retreat, higher costs for everything that freight trucks carry, farm tractors harvest and heating oil warms will hit consumers and put a drag on the economy.

"They have no good options," a former administration official, granted anonymity to speak candidly, said of the president's aides. "And, if anything, inflation may get worse because you'll get some bleed-through from diesel, which impacts everything."

A sharp decline in oil prices could help Republicans escape some voter anger over rising prices, though oil analysts say the odds of that happening are slim given renewed attacks in the Middle East. Otherwise, the last hope for the party may be if Trump can convince voters at this week's GOP convention that there is a plan to ease the financial pain, said Alex Conant, a Republican strategist at Firehouse Strategies.

"We should expect Trump to talk about his attempts to make things more affordable, including his tax cuts and reducing regulations," Conant said.

"There's nothing worse for a president of the United States than inflation or runaway prices," Conant said, but "voters are more sympathetic toward a problem if they think you're trying to fix it."

Trump met with refining industry executives last week to discuss ways to expand fuel-making capacity, White House spokesperson Taylor Rogers said. Fuel prices will also fall "as the U.S. continues to maintain full control of the Strait of Hormuz," Rogers said.

"President Trump remains committed to unleashing American energy dominance, cutting costs, and putting more money back in the pockets of hardworking American families," Rogers said.

Rising diesel prices are particularly insidious for the economy because there's no quick solution. ExxonMobil and other oil producers may drill more wells when oil prices are high, but no company has a spare fuel refinery at hand to replace those in Russia that Ukraine has destroyed as part of the war there or that are trapped on the wrong side of Hormuz.

Farm country is feeling the sting. Sen. Roger Marshall (R-Kansas), who is facing a surprisingly tight race for reelection this November, said higher fuel prices are "a real concern" for his constituents. At $5.51 a gallon, the average price of diesel in the state is $2 more than it was last year.

"It's not a political concern as much as just a real concern," Marshall said in an interview. "Look, my neighbors, the people I go to church with, the babies I deliver, their families, farm and ranch ... diesel is one of the major input costs that I'm talking about, so it is a real thing."

Stephen Moore, an informal economic adviser to the administration, said prices are definitely a political problem: "High gas prices and oil prices have a reverberation effect."

But when asked if it was too late for Republicans to reverse their fortunes, he continued: "I think the answer is no. For example, we got this blockbuster jobs report, which was just what the doctor ordered, and it allayed a lot of fears that we were headed into a recession. This economy is heating up again."

Still, a stronger economy can boost prices, and better jobs numbers are feeding bets that the Fed might have to raise rates soon. Investors are already bidding up market-set interest rates, partially over energy fears.

"People are worried that [oil and diesel prices] will seep into the supply chain," said Dan Pickering, chief investment officer at energy investment firm Pickering Energy Partners. "Oil doesn't care about interest rates, but interest rates care about oil."

And while the U.S. stock market has proven resilient, cracks may start to emerge.

Abby Yoder, U.S. equity strategist at JPMorgan's private bank, said many big companies that drive the stock market are still seeing healthy earnings despite higher oil prices and will likely find ways to offset or avoid the high energy costs associated with the Strait of Hormuz. But consumer spending drives the broader economy, and rising prices will continue to squeeze households, which will feed into businesses' bottom lines as well.

"The longer this goes on, particularly in diesel prices, which are 15 to 30 percent of grocery costs, that could really start to bite going forward," she said.

Energy prices are only one factor feeding into inflation. Red-hot investment in data centers, droughts drying up food supply, and the administration's own tariffs have helped keep prices high. But the growth in oil and fuel prices may be offsetting any price relief elsewhere.

"We wouldn't even be talking about inflation and a Fed hike if it weren't for this conflict," Yoder said.

One of the ways higher energy prices are threatening Republicans' price message is by covering up good news consumers may experience elsewhere, said Stephen Brown, chief North America economist at financial analyst firm Capital Economics. In one example, higher gasoline and diesel costs are erasing any relief voters may have felt from the unwinding of some of Trump's trade tariffs in the wake of a February Supreme Court ruling knocking many of them down, Brown said.

"The big issue is that a lot of those offsets would be masked," Brown said. "The offsets will probably prove more temporary than the impact of the higher fuel prices."

The pain could get worse in the Senate battleground of Maine, where Sen. Susan Collins is in a tough reelection bid. Canada's largest refinery — one that exports much of its fuel to the U.S. Northeast — will be shut down for maintenance this fall, taking supply out of the market just when voters get ready to head to the polls.

Collins campaign spokesperson Blake Kernan did not answer specific questions but said the senator has not reached out to refinery owner Irving Oil.

Perhaps the only option the administration has to bring prices lower — short of ending the war with Iran — would be to ban the export of oil and fuel, something Energy Secretary Chris Wright and others have vowed never to do.

Instead, Treasury Secretary Scott Bessent and other administration officials have taken to blaming the problem on Ukraine, which has used drones to destroy refineries in Russia as it tries to push back that country's four-year-old invasion. Trump and others have also pointed to a deal they have said would boost oil production in Venezuela, though none of the increased drilling there — if it happens — is expected to reach the market for years.

"While Venezuelan oil could add large and much needed supplies if all goes well in the coming decades, it's not a major factor near term in terms of pump prices," said Bob McNally, head of geopolitics and energy consulting firm of Rapidan Energy Group and a former energy adviser in the George W. Bush administration.

Trump's best hope is actually Beijing, said Roukaya Ibrahim, an oil market analyst at BCA. China could start easing a fuel export ban it implemented ago to keep its domestic market supplied. More Chinese diesel in the market could soften the edge of prices in the United States, Ibrahim said.

But for now, the recent exchange of fire between the U.S. and Iran has driven up oil prices to above $94 a barrel, a level last seen in June. The difference between now and then is that oil traders are less likely to fall in line with any attempt Trump makes to jawbone prices lower, said Pickering.

"A higher [oil] price is becoming more permanent. Peace isn't happening," Pickering said.

Jordain Carney contributed to this report.