May 14 (Reuters) - Trump administration officials are scrambling to contain the economic and political fallout of the war with Iran, three people familiar with the White House's discussions told Reuters, as hopes for a quick resolution fade.
U.S. President Donald Trump this week backed suspending the federal gas tax, a step that would knock 18 cents a gallon off motor fuel prices currently averaging more than $4.50 a gallon nationwide. Once viewed by some White House aides as unnecessary, the idea
is gaining urgency as officials run low on options to show they are tackling rising costs, said the people, who spoke on the condition of anonymity to discuss sensitive internal deliberations.
Within the White House, a consensus has emerged that with prices up 50% since the start of the war, Trump needs "a visible consumer relief move now," one of the people said.
Historically, $4-per-gallon gasoline has been a level that triggers public backlash and economic anxiety. That's borne out since the war started, as consumer sentiment recently dipped to a record low, and U.S. consumer inflation surged to 3.8% in April, highest in nearly three years.
More than six in 10 Americans say their household's finances have taken a hit from higher gas prices, according to a May Reuters/Ipsos poll that put Trump's economic approval rating at just 30%, down several points since the beginning of the war.
Now, Trump faces mounting pressure from fellow Republicans who fear economic pain caused by the war could spark voter backlash and cost the party control of the House of Representatives and possibly the Senate in November's midterm elections.
Administration officials have been poring over market data to gauge whether the national average price could climb to $5 a gallon, according to two people familiar with the discussions. Seven states have already surpassed that mark, AAA data shows.
"They feel like that’s their largest vulnerability right now: that specific cost, gas, not overall economic conditions," said a political adviser to the White House. "The toughest thing, too, is that we made gas prices the Achilles' heel for (former President Joe) Biden and now it's our own.”
White House spokeswoman Taylor Rogers said Trump and his energy team had anticipated the war's disruptions to the global energy markets and prepared a plan to mitigate the impact.
"The ability to supply both the United States and our allies with reliable, affordable, and secure energy has long been a key strategic objective of President Trump, and his successful efforts to unleash American oil and gas has achieved this objective," Rogers said.
'SMALL PRICE TO PAY'
The administration's concerns have deepened as U.S. oil and fuel exports have surged to records, triggered by Asian and European buyers scrambling for needed supply. That has drawn down U.S. inventories at a time they typically rise, raising alarms among Wall Street analysts who warn the U.S. could face a crunch that could send gasoline, diesel and jet fuel prices even higher this summer.
Energy prices have spiked since Iran cut off access to the Strait of Hormuz, a waterway that normally carries one-fifth of the world's oil supplies. Companies ranging from airlines to McDonald's are seeing the effects, with the fast-food giant's CEO saying last week that lower-income consumers were spending less.
U.S. airlines’ fuel expenses in March jumped 56% from February, according to Transportation Department data, squeezing carriers already operating on thin margins, including Spirit Airlines, the troubled budget carrier that shut down early in May.
Trump has called the increases a “small price to pay” for efforts to topple Iran’s regime and prevent Tehran from acquiring a nuclear weapon.
Asked Tuesday whether Americans’ finances were motivating him to strike a deal, Trump replied: "Not even a little bit."
"The only thing that matters when I'm talking about Iran — they can't have a nuclear weapon," Trump told reporters. "I don't think about Americans' financial situation. I don't think about anybody. I think about one thing — we cannot let Iran have a nuclear weapon. That's all."
GAS TAX IDEA GAINS TRACTION
The gas tax proposal was considered a fallback as recently as late April, one of the people familiar with White House discussions said, but the idea gained traction in the past week as the Iran ceasefire track faltered and officials concluded they needed a policy pivot Americans would feel.
Trump's proposed suspension would require congressional approval. Some Republican lawmakers have expressed enthusiasm for the idea, but party leaders have so far been noncommittal.
In April, the administration exempted some Russian oil from sanctions and waived shipping regulations to facilitate additional fuel transport. On Monday, the Energy Department said it would loan another 53.3 million barrels of oil from the national security stockpile to ease market jitters.
Just one in four Americans believe the war on Iran has been worth the cost, with 53% believing it has not been worth it and the rest unsure, according to a Reuters/Ipsos poll conducted April 24-27. One in five Republicans said the war has not been worth it.
Amy Koch, a Republican strategist who advises state and federal candidates, said the administration has a short window to end the conflict and ease fuel price pressures ahead of Memorial Day, the unofficial start of summer driving season.
"I think people are willing to endure some short-term financial pain if it means we deal with Iran," Koch said, "but the clock is ticking for the White House."
(Reporting by Jarrett Renshaw, Nandita Bose and Jacob Bogage. Additional reporting by Humeyra Pamuk. Editing by Colleen Jenkins and David Gaffen)
