Apr 12, 2024 - Energy & Environment

Hot oil summer: Soaring prices threaten consumers and Biden

Brent crude oil futures
Data: Yahoo Finance; Chart: Axios Visuals

Summer hasn't even started yet, but oil markets are already making things uncomfortably hot for the White House.

Why it matters: Crude's recent rise, which feeds into higher inflation and pump prices, heightens President Biden's political jeopardy amid an already tough reelection campaign.

  • "[O]ur models show a meaningful ... inverse correlation over more than four decades between Presidential approval ratings and real gasoline prices," ClearView Energy Partners said in a note.

The big picture: Average gas prices are up 24 cents per gallon over the last month to $3.63, per AAA, and summer driving demand typically puts more upward pressure on costs.

  • Pump prices are directly visible to consumers, but higher fuel costs also make taming inflation harder.

Threat level: The Middle East crisis has already pushed up oil — and that's without any real supply disruption.

  • They could soar if things escalate. All eyes are on Iran's possible responses to Israel's strike on an Iranian compound in Syria.

The intrigue: "The run up in prices has sparked discussions about a revived White House energy diplomacy effort aimed at securing an easing of OPEC cuts this June," RBC Capital Markets analysts said in a note.

  • They see a potential release from the Strategic Petroleum Reserve if the White House "finds itself on the wrong side of the $4/gallon psychological pain point."

What we're watching: In an analysis, the Center for Strategic and International Studies cautioned that supply risks might not materialize and that bullishness will fade.

  • But CSIS analysts warn "market psychology has shifted significantly, and it tends to take on a momentum of its own in the absence of clear evidence to the contrary."
  • "At a minimum, prices are likely to stay at their current level, and, as long as the conflict in the Middle East continues, volatility seems likely to return," CSIS's Ben Cahill and Raad Alkadiri wrote.
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