Less than a month before Election Day, and with voters in some parts of the country already casting early ballots, gas prices last week broke their 99-day downward trend to begin ticking back up.
As inflation and the economy remain the top issues for the vast majority of voters, a rising pump price is certainly not something the Democrats wanted to see happen. But is there anything the party currently in power can do about it at this point in the campaign season?
OPEC+ the Likely Cause of Gas Price Increases
Nationwide, the average price for a gallon of regular is about a dime more than it was a week ago, according to AAA, and twenty cents more than a month ago.
However, in areas of California gas prices have gone up “tremendously,” roughly $1.00 to $1.50 a gallon, according to Patrick De Haan, Head of Petroleum Analysis at GasBuddy. The Great Lakes have also been hit hard, he said on Saturday, with prices rising 50 cents to $1.00 a gallon in that region
This comes after OPEC+, which includes Russia, announced on October 5 that it would slash oil production by 2 million barrels a day. But is OPEC’s production cut the only reason for the uptick?
Pretty much, according to Michael Lynch, a Distinguished Fellow with the Energy Policy Research Foundation. “It’s the only thing going on right now,” he tells Political IQ.
Some see OPEC’s move as a slap in the face to President Biden, who visited Saudi Arabia in July and shared a now-infamous fist-bump with Crown Prince Mohammed bin Salman (MBS)—even though Biden had called Saudi Arabia a “pariah” state following the 2018 murder of American journalist Jamal Khashoggi, which U.S. intel has pinned on MBS.
Others, like The Washington Post’s editorial board, have gone so far as to accuse MBS of trying to influence the outcome of the U.S. midterm elections “to the advantage of the party of former president Donald Trump, who dealt warmly with him.”
Lynch brushes off those accusations as unlikely. “People for 50 years have been trying to tie OPEC production quotas and Saudi oil production to various political and foreign policy moves,” he says. “What they’re really reacting to is the oil market far more than anything else.”
The Saudis’ and OPEC’s true rationale for the production cut, he says, is “fear that a recession is going to send prices tumbling beyond what they want. And most people expect oil demand to be weak in the next few months.”
Economist Mohammed El-Erian, President of Queens College in Cambridge, UK, echoed this notion on Sunday. “OPEC is looking to protect oil prices in the context of declining global demand,” he said. “All three major areas in the world—China, Europe and the U.S.—are slowing much faster, which means less demand for oil. So what does OPEC do? They cut back supply. So this shouldn’t have come as a big surprise.”
Biden Promises “Consequences” Against the Saudis
Still, Biden said in an interview Tuesday that there would be “consequences” for Saudi Arabia amid the production cut. “I’m not going to get into what I’d consider and what I have in mind. But there will be—there will be consequences.”
He did say he would consult Congress on the way forward. Meanwhile, Sen. Richard Blumenthal (D-CT) has teamed with Rep. Ro Khanna (D-CA) to craft legislation that would stop all U.S. arms sales to Saudi Arabia for one year.
Lynch doubts that would motivate the Saudis to change their tune. “It wouldn’t affect their military stance significantly given the existing inventory of arms they have,” he says. “Outside of Yemen they are not engaged in any way in any kind of military conflict.”
He figures it’s most likely to make them “annoyed with the U.S. government,” which is “not going to encourage them to increase oil production and lower prices.”
White House Gets Into War of Words With Big Oil
In the meantime, the Biden Administration has been feuding with Big Oil. As gas prices began creeping up, last week the White House pointed fingers at the major oil companies and their record profits. That, in turn, sent ExxonMobil chafing at pressure from the White House to redirect some of its exported fuel from around the world to shoring up U.S. inventories.
In response, Energy Secretary Jennifer Granholm said in a statement, “[A] company that made nearly $200 million in profit every single day last quarter misreads the moment we are in. These companies need to focus less on taking every last dollar off the table, and more on passing through savings to their customers.”
Lynch defends the oil companies, saying they’re held to a different standard than other industries. “Nobody says to the farmers, ‘Gee, the price of wheat is up, but you shouldn’t sell it at that high a price because you’re making too much money.’ It’s just that the oil companies are political pariahs so it’s easy to get away with that kind of stance.”
According to De Haan, Big Oil is also reacting to the messaging from the Biden White House over the past year and a half about moving away from the fossil fuel sector to alternative energy sources. He said that’s “undermining oil companies’ desires to invest knowing that the writing may be on the wall,” adding that “the President could provide some clarity [to the oil sector] while he shifts his agenda to cleaner energy.”
Few Options So Close to Election Day
According to independent oil trader Dan Dicker, author of “Turning Oil Green,” the price of oil dropped to about $40 a barrel over two and a half months before it started rising again.
“That’s been mostly because of one, the Federal Reserve continuing to raise interest rates,” he said Friday, “but also with President Biden releasing supplies from the strategic petroleum reserve [SPF]. He has released about 350 million barrels into the marketplace, forcing prices lower.”
But Lynch says, “The market balance is not in a position where a little more oil from the SPF would make a difference to prices,” although he notes, the Administration has talked about releasing some more in November.
“There is the possibility of easing sanctions on Venezuela and/or Iran,” Lynch points out. However, “Neither of those seems likely to be imminent, but either one would bring prices down a bit.”
What about opening up more federal lands for oil and gas leasing, like Biden did earlier this year?
That “would make a difference,” says Lynch, but not between now and the election. And besides, “I think if he announced it, he would probably discourage Democratic voters, and they really don’t want to do that before the midterms.”
So, when are we likely to see gas prices start to drop again?
“Probably not much longer than a few more weeks,” says Lynch. “A lot of it depends on the war in Ukraine, but I think we’re entering a season where we’re going to see weaker demand because of higher interest rates, slowing growth, Chinese lockdowns and so forth.”