Source: Golden Ten Data
Author: Yang Dapan
Although there is no clear statement, the Biden administration's actions have shown that Biden is worried that rising oil prices may ruin his re-election efforts.
Although not part of the election slogan, US President Joe Biden is determined to control gasoline prices when running for re-election.
Gasoline prices have been rising this year, and although as president, Biden doesn't need to buy his own gasoline, he is still deeply hurt by the rise in oil prices in 2022. Biden's approval rating declined as the price of gasoline and many other things soared, and it never recovered.
Gasoline prices in the US have slowed in 2023, but are now starting to pick up again, from around $3.20 per gallon in early January to around $3.60 now. The recent rise in oil prices and heightened tension in the Middle East suggest that gasoline prices are likely to rise further.
Biden doesn't want to draw attention to rising energy costs, but he's taking some behind-the-scenes steps to help keep the oil supply adequate and ensure gasoline doesn't hit the sensitive $4 per gallon mark.
For example, the US Department of Energy recently cancelled two large oil purchases for US strategic reserves on the grounds of high oil prices. After the Russian-Ukrainian conflict caused oil prices to soar and gasoline prices peaked at $5 per gallon, Biden released about 230 million barrels of oil from strategic oil reserves in 2022 and 2023. The US Department of Energy only began slowly replenishing reserves last summer.
Since the US benchmark WTI crude oil is trading at around $87 per barrel, the US Department of Energy said that refusing to buy oil above the target price of $79 was to protect “taxpayer interests,” although there may be other reasons.
ClearView Energy Partners speculated in an analysis report on April 3, “The Ministry of Energy may have decided that it does not want to risk boosting oil prices. Any new demand, whether from the government or private sector, will put upward pressure on oil prices, and it is clearly not in Biden's interest to do so.”
The Biden administration is also pressuring Ukraine to reduce new attacks on refineries in Russia because Biden is concerned that reduced supply of Russian oil products could raise oil prices for Americans.
Meanwhile, US aid for the war in Ukraine has been reduced to almost zero, and a small group of conservative Republicans in the House of Representatives is blocking the $60 billion additional aid already passed by the Senate. So the US is basically telling Ukraine, “We can't help you, and we don't want you to help ourselves.”
Finally, although Venezuelan President Nicolas Maduro did not comply with the conditions proposed by the US last year, the Biden administration seems prepared to continue lifting the sanctions on Venezuelan oil sales enacted in October of this year. Essentially, the lifting of such sanctions would allow Venezuela to sell more oil to the US and other global buyers, slightly increasing global supply.
Although none of these moves involved significant amounts of oil, it may indicate how anxious Biden and his re-election team are about the prospects for rising US gasoline prices.
Last year, OPEC+, including Russia, continued to cut production to support oil prices. Oil prices remained below $80 for most of this period as the market returned to normal, but the war between Israel and Hamas now risks escalating, which could affect oil supply in the Middle East, and this expectation is beginning to push up oil prices.
Meanwhile, J.P. Morgan expects oil prices to rise to $100 per barrel or more if Russia fails to increase production. In the months leading up to the presidential election, such an outcome would be disastrous for Biden.
According to J.P. Morgan commodity strategist Natash Kaneva, the elderly White House president may extract more oil from strategic reserves that have largely been exhausted. J.P. Morgan estimates that the Biden administration “has policy space to release up to 60 million barrels of crude oil, thereby increasing crude oil supply by 500,000 barrels per month.”
Financial blog ZeroHedge commented that it is unclear how Biden will describe such an obvious political move as a state of national emergency; he may need to start another war or two, but it is almost certain that he will try it.
One thing Biden can do but hasn't done yet is to provide more incentives to US drillers. Although this would conflict with his pledge to rid the US economy of carbon emissions, this is probably not worth mentioning compared to the consequences of higher oil prices. Since 2018, the US has been the largest producer of oil in the world, and US oil production in 2023 reached a record high.
U.S. crude oil exports are also at an all-time high, and are even stealing global market share from OPEC+ oil producers. In fact, America's ability to produce more oil may be the “trump card” for controlling oil prices.
Editor/Jeffy