The Iran war is blowing a hole in the Trump administration’s claims that eliminating climate rules for cars and trucks will save Americans money.
Under President Donald Trump, the U.S. has rolled back fuel economy standards and ended tailpipe limits on greenhouse gas emissions. Administration officials have argued that the costs of those moves are minimal — because Trump’s policies would result in lower gasoline prices.
But gasoline prices are surging after the U.S. and Israel began strikes against Iran last month. Even if the war ends as soon as Energy Secretary Chris Wright asserts, high prices could persist for much longer.
The U.S. Energy Information Administration sharply raised its forecast for 2026 gasoline prices last week in its monthly report. The agency now predicts pump prices will average $3.34 per gallon, up from last month’s prediction of $2.91.
The longer high prices remain, the more consumers end up paying for Trump’s regulatory rollbacks, said Joshua Linn, a senior fellow at the think tank Resources for the Future.
“If prices rise this year and hypothetically decrease in six months, then the effect on the cost of eliminating the standards is going to be pretty small,” he said. “If, though, this contributes or leads to subsequent chaos in the Middle East and instability in global oil markets and prices are high for a long period of time, that’s totally different.”
A 50-cent gas price increase over the next 10 years, for example, could “add up to tens of billions of dollars in extra costs of eliminating the standards,” he said.
Even without the Iran war, the Trump administration relied on rosy assumptions to assert that consumers would save money from the repeal of tailpipe limits and the so-called endangerment finding, the legal underpinning for most climate rules.
EPA’s cost-benefit analysis uses EIA’s “low oil price case” — which models lower-than-expected global prices — to assert that the vehicle rule repeal will deliver savings to customers. That scenario assumes a gallon of gasoline will cost about $2.25 in 2027 and decrease from there, according to the analysis.
The analysis is only able to show savings by pairing that scenario with one that predicts high future costs for electric vehicles and charging infrastructure.
EPA spokesperson Brigit Hirsch told POLITICO’S E&E News that the decision to include the low oil price scenario “is not intended to model a specific policy.”
“Instead, our analysis provides a reasonable analytical range for how lower fuel price conditions could influence the rule’s projected economic impacts,” she said.
Asked whether the Iran war could make the cost of repeal higher than EPA had predicted, Hirsch noted that the rule and supporting documents cite “uncertainties” that complicate future price predictions — including war.
The affordability argument
In its rule repeal, EPA stressed that cost played no role in its decision to stop regulating climate pollution. The agency argued instead that the Clean Air Act doesn’t authorize EPA to tackle global pollutants, like greenhouse gases that contribute to climate change.
But in public statements and press releases, the administration cast the repeal as a boon for affordability.
On Feb. 12, a little more than two weeks before the U.S. attacked Iran, Trump said that repealing the vehicle rules “will eliminate over $1.3 trillion of regulatory cost and help bring car prices tumbling down dramatically.”
At the same event, EPA Administrator Lee Zeldin said the rollbacks would save U.S. car buyers “over $2,400 for a new vehicle.” EPA’spress materials for “the single largest deregulatory action in U.S. history” echoed those claims.
Those estimates draw from EPA’s regulatory impact analysis, which tallies the potential costs and benefits of the repeal.
The analysis — which, at 32 pages, is a fraction of the typical length for such reviews — considers four price scenarios using data from EIA’s 2025 Annual Energy Outlook. One scenario shows that if oil prices stay as high as EIA expects in its highest-probability cases, the repeal will actually cost consumers more than $100 billion between 2027 and 2055.
But EPA complains that the EIA’s business-as-usual scenarios don’t give the Trump administration enough credit for bringing oil prices down.
The cases don’t “take into account the policies being implemented by President Trump that are intended to drive down the price of gasoline and diesel,” the analysis states. It doesn’t specify what policies EIA — the independent analytical arm of the Energy Department — should have accounted for.
EPA can only show net benefits to consumers from the rule repeal if it assumes oil prices will be lower in the future than predicted in EIA’s business-as-usual reference case. So the analysis also includes a scenario that pairs EIA’s “low oil price case” with high cost projections for electric vehicles and charging infrastructure.
The result: a finding that the vehicle rule repeal would deliver roughly $250 billion in net savings to U.S. consumers.
EPA’s Hirsch said that the agency made no claim that Trump’s policies would bring about EIA’s “low oil price” case. But EPA’s messaging about the repeal seems to be based on that scenario. Modeling posted to the rescission rule’s docket shows that Zeldin’s oft-repeated claim about car prices tumbling “over $2400” depends on it.
“Ultimately, the Administration’s agenda is focused on increasing domestic energy supply and reducing regulatory barriers which could affect production,” said Hirsch.
But oil is a global commodity. And analysts say more domestic fossil fuel production — if Trump can pull that off — wouldn’t dent global oil prices very much. In fact, the best recipe for increased U.S. production would be policies that make production easy, plus high global oil prices, said Linn, the senior fellow at Resources For the Future.
“[U.S. producers] would cut back on their own production if oil prices were really that low,” he said. “So, I think the only way you can get a lot more production is with both these policies that make it easier to produce and high level oil prices.”
Furthermore, EIA’s low price scenario is partly dependent on the climate policies that Trump is rescinding.
As the agency explains in its 2025 Annual Energy Outlook, the low oil price case is based both on optimistic projections about global oil supply and on assumptions that demand will drop. For developed countries like the U.S., EIA wrote, demand would decrease “as a result of adopting more efficient technologies, extending Corporate Average Fuel Economy [CAFE] standards, lowering travel demand, and increasing natural gas or electricity consumption.”
Trump’s moves to slash regulations and tax incentives for electric vehicles could instead stimulate demand for oil, analysts say, nudging prices higher while making U.S. consumers more vulnerable to price spikes.
“The policies that Trump is putting into place would actually increase the price of gasoline in the coming decades by keeping demand for oil high and resulting in higher persistent prices for oil,” said Amanda Levin, director of policy analysis at the Natural Resources Defense Council.
EIA’s outlook agrees. The report included an “alternative transportation case,” which combined EIA’s baseline global assumptions about oil supply and demand with modeling of the Trump administration’s regulatory and tax incentive rollbacks. That included EPA’s February repeal of tailpipe emissions rules.
The EIA report shows that Trump’s regulatory rollbacks could increase the price consumers pay at the pump by about .25 cents a gallon by 2035 and .75 cents a gallon by 2050, compared with the Biden-era scenario.
“I think the actions the administration is taking to reduce access to clean, affordable electricity and electric vehicles is certainly going to compound,” said Ellen Robo, a senior manager for clean air policy at the Environmental Defense Fund.
‘A tall order’
The U.S.-Israel war with Iran has added an oil supply shock to the list of Trump policies that could increase oil demand.
Iran has retaliated to the attacks by effectively closing off the Strait of Hormuz, a key waterway that roughly 20 percent of the world’s oil passes through. Oil and gasoline prices have spiked worldwide, with Brent crude oil rising above $100 per barrel on Tuesday.
It’s unknown how long the current crisis will continue to impact global oil prices.
Rory Johnston, a market researcher and author of the Commodity Context newsletter, said that could depend on whether Trump’s Iran gambit is successful. The White House is trying to follow the same playbook it did in Venezuela, he said, where it installed a new leader who allowed Venezuelan crude to enter the world market.
“They’re saying that this is short-term pain for a long-term kind of structurally lower oil price,” said Johnston. “The challenge is they have to win. To do that, they actually need to achieve regime change to a stage where whatever regime or government that replaces the current one is not also sanctioned by Washington. And that, I think, is a pretty tall order.”
But if the strikes don’t achieve the kind of political transformation that makes Iran investable, Johnston said, “that just means that you’re going to have the most important oil-producing region in the world in a heightened state of anxiety, where this could just flare up every once in a while.”
That could keep oil prices high for a long time, he said.
Linn, who is also a professor at the University of Maryland, noted that the Biden-era tailpipe rules that EPA repealed applied only to new vehicles and would have taken effect in model year 2027.
Demand reduction from the standards would have culminated in 2032. For the current crisis to add meaningfully to the cost of the repeal, Linn said, it would need to lead to elevated oil and gasoline prices for many years. That means it would take long-term oil price hikes to increase the costs of eliminating fuel efficiency standards.
“Twenty years from now, we’ll have all brand new vehicles that use a lot more gasoline,” he said.
Some analysts think the war could create a new swell of support for the clean energy transition that Trump has abandoned.
Johnston said he expected the crisis to elevate prices in the short and medium terms. But in the long term, he said, higher prices could lead to regulatory policies and consumer choices that reduce global demand for fossil fuels.
That’s what happened in the 1970s when turmoil in the Middle East disrupted oil exports, he said. It led to conservation policies, including in the U.S.
“I think this has the potential to reaccelerate that,” said Johnston. “I think it just bolsters the political case for transition more so than it would have prior to this war.”
