Down to $3 per Gallon
There are prospects that the decline in gasoline prices in the United States could accelerate 'disinflation' (a slowdown in price increases). Attention is focused on whether this can provide relief to President Joe Biden, whose path to re-election has been clouded by high inflation making life difficult for Americans.
According to major foreign media on the 25th (local time), the average gasoline price in the U.S. is expected to fall below $3 per gallon within a few days. This is a significant drop from $5 per gallon last summer following Russia's invasion of Ukraine.
The decline in gasoline prices is significant because it has a considerable impact on consumers' inflation expectations alongside food prices. Gasoline accounts for about 3% of the U.S. Consumer Price Index (CPI), but economists analyze that its influence on inflation expectations is much greater. Gisela Hosha, an economist at Citigroup, explained, "The relationship between gasoline and inflation expectations is not as perfect as in the past, but it remains very important."
As gasoline prices fall, the inflation rate is already slowing down. The Personal Consumption Expenditures (PCE) price index, closely watched by the U.S. Federal Reserve (Fed), rose 2.6% year-on-year last month. The rate of increase in energy and service prices slowed, with the monthly rise decreasing by 0.1%, marking the first decline in PCE prices since April 2020. U.S. crude oil prices have also fallen 20% since September due to global demand slowdown, increased shale gas production, and reduced consumption.
The Biden administration, which had been worried about high inflation, is also relieved by the drop in oil prices. Price stability is considered the top policy priority ahead of the November election next year. In particular, leading Republican presidential candidates, including former President Donald Trump, have criticized President Biden's climate policies for raising fuel costs. President Biden welcomed the November PCE price announcement as an "important milestone" in returning inflation to pre-COVID-19 pandemic levels.
With inflation being controlled due to cumulative tightening effects and oil prices falling, attention is also focused on whether voters' evaluations of President Biden's economic performance will improve. According to an online poll conducted by major foreign media and the University of Michigan Ross School of Business from the 5th to 6th, surveying 1,004 U.S. voters, only 17% responded that their financial situation had improved since the Biden administration took office. When asked to name the three biggest financial burdens, 79% of respondents cited "rising prices."
Foreign media analyzed, "Although recent turmoil in the Middle East has temporarily halted the decline in oil prices, uncertain macroeconomic conditions could lead to further drops in oil prices next year," adding, "This could put additional pressure on gasoline prices as the 2024 presidential campaign intensifies."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
