Inflation Concerns Rise Amid Soaring Oil Prices... Biden Faces Challenges on Path to US Reelection

US Gasoline Prices Hit Highest in 9 Months
Setbacks Pose Challenges to Biden's Reelection Campaign

With international oil prices rising day by day, concerns about inflation are resurfacing, putting U.S. President Joe Biden's reelection campaign in jeopardy. The White House, which has touted controlling inflation as its greatest economic achievement during Biden's tenure, may have to revise its reelection strategy depending on oil price trends.

Due to the upward trend in international oil prices, the average gasoline price across the United States reached $3.829 per gallon as of the 6th (local time), up $0.11 from the previous week. Regionally, gasoline prices exceed $4 per gallon in Washington DC, Alaska, Hawaii, Utah, Oregon, Nevada, and Washington state. Particularly, California leads the nation with an average price of $5.064 per gallon. U.S. gasoline prices have surged to their highest level in nine months, representing about a 60% increase compared to January 2021, when President Biden took office.

The soaring oil prices have triggered an emergency within the White House, which has officially launched its reelection campaign. A White House official stated, "We are closely monitoring gasoline price trends," adding, "We emphasize that the average U.S. gasoline price has fallen by more than $1 per gallon since peaking last summer."

The White House has highlighted 'Bidenomics,' emphasizing President Biden's economic policies that have created record employment and successfully controlled the worst inflation situation, while promoting the 'Invest in America' nationwide tour. However, with renewed inflation concerns emerging recently, there are growing worries that the promotional strategy may need to be revised. Previously, ahead of last year's midterm elections, the Biden administration proposed a windfall tax on energy companies in response to sharp oil price increases and intensified inflation criticism.

Bob McNally, CEO of Rapidan Energy, a Washington-based consulting firm and former advisor to President George W. Bush, said, "The White House is in a panic over the rising oil prices," adding, "The increase in oil prices poses a threat to the president's credibility and approval ratings."

[Image source=AP Yonhap News]

International oil prices, which had been relatively stable earlier this year, have been on a high trajectory for six consecutive weeks. Oil prices had struggled to rise due to production limits by major oil-producing countries and weak expectations for demand recovery, but gained upward momentum as U.S. economic indicators improved and anticipation grew for additional economic stimulus measures from the Chinese government. Amid this situation, Saudi Arabia decided to extend its voluntary production cut of 1 million barrels per day, and Russia announced it would reduce crude oil supply by 300,000 barrels per day throughout September, causing oil prices to surge further.

International oil prices, which fell below $70 per barrel several times this year, have now soared well above $82 per barrel (as of the 4th) based on West Texas Intermediate (WTI) crude prices. Dan Yergin, Vice Chairman of S&P Global, said, "With demand surging and supply tight, oil prices will continue to face upward pressure as we enter autumn," adding, "There is growing anxiety in Washington politics over the rising oil prices."

Market experts expressed concerns that Russia's 'energy weaponization' measures ahead of the U.S. midterm elections last November could also impact next year's presidential election. To control the oil price surge caused by Russia's energy weaponization, President Biden pursued measures such as introducing a price cap on oil and restoring the Iran nuclear deal. In July last year, he made a surprise visit to Saudi Arabia to directly request Crown Prince Mohammed bin Salman to increase oil production, but achieved little success.

The upward trend is expected to continue for the time being due to the escalation of the Russia-Ukraine war. For Brent crude, the most actively traded oil, there are even forecasts that prices could soar to $100 per barrel. Consulting firm Enverus predicted that due to record-high demand and Saudi Arabia's supply cuts, Brent crude prices could reach $100 per barrel by the end of the year.

Jeff Currie, Global Head of Commodities Research at Goldman Sachs, said, "Last month, global oil demand reached an all-time high of 122.8 million barrels per day, driven by a surge in air travel demand and increased crude oil imports by China," adding, "With fears of a recession diminishing, investors' attention is returning to oil."