The recent surge in gasoline prices in the late summer has not only sparked concerns about inflation but has also provided Republicans with an opportunity to criticize President Joe Biden’s green agenda. However, a closer examination of the situation reveals a complex web of factors at play. While U.S. oil production has reached record highs and is poised for further growth, it has not been able to contain rising gasoline prices. This phenomenon underscores the influence of the global oil market on fuel prices, transcending domestic production levels. As the public assigns blame for high gasoline prices, it becomes evident that the outcome of President Biden’s economic policies, often referred to as “Bidenomics,” is not solely determined by his domestic energy initiatives. Instead, it is influenced by global oil prices, which are, in turn, shaped by international events and market dynamics.
Gasoline prices and political consequences
High gasoline prices have long been a focal point in American politics, with the public often holding the occupant of the White House responsible. Regardless of economic conditions or policies, the U.S. consumer tends to attribute surging fuel costs to the sitting president. This phenomenon reflects the significance of gasoline prices in shaping public perception and, consequently, political outcomes. Quincy Krosby, Chief Global Strategist for financial advisory firm LPL Financial, aptly captures this sentiment, noting that “The U.S. consumer blames whoever is in the White House” for high gasoline prices. This attribution is particularly ironic in the context of President Biden’s tenure, given the overall strength of the economy. It highlights the challenge of managing inflationary pressures while navigating a global oil market that is influenced by events beyond America’s borders.
Hopes and realities of U.S. energy superpower status
The United States’ ascent to becoming the world’s leading oil producer has been met with great expectations. In 2018, Wall Street Journal opinion columnist Walter Russell Mead predicted that the abundance of U.S. energy supplies would make energy markets resilient to geopolitical shocks. Similarly, oil market analyst Ed Morse foresaw in 2015 that rising U.S. oil production would substantially reduce oil prices and potentially lead to the decline of OPEC’s influence. However, reality has not aligned with these optimistic forecasts. While the United States has decreased its reliance on OPEC for oil imports, the domestic fuel market remains tethered to decisions made at OPEC’s meetings in Vienna. This dependence persists despite the record-breaking production of oil from U.S. shale fields.
U.S. oil Production’s growth trajectory
U.S. oil production is on a remarkable growth trajectory. The federal Energy Information Administration projects that it will reach an all-time high of 12.8 million barrels per day in the current year and continue to rise, reaching 13.1 million barrels per day by 2024. This surge in production is a far cry from the 5 million barrels per day observed in 2008, signifying the United States’ status as the world’s foremost crude oil producer.
However, this surge in domestic oil production has not translated into stability in gasoline prices. The global oil market’s dynamics and external events continue to exert significant influence, leading to fluctuations in fuel costs.
Global forces and their impact
Global factors play a pivotal role in determining the trajectory of gasoline prices in the United States. The Paris-based International Energy Agency predicts that oil supply will outstrip demand in the coming year, potentially alleviating pump prices. This illustrates how global supply and demand dynamics can have a direct impact on American consumers’ wallets.
Despite these global trends, Republican presidential hopefuls have not hesitated to criticize President Biden’s energy policies, particularly those related to green incentives embedded in climate legislation. In campaign ads, figures like former Vice President Mike Pence have attributed hardships faced by Americans to Biden’s energy policy. This critique raises the question of whether the president has effectively harnessed the nation’s energy resources to mitigate gasoline price increases.
Contrary to the political rhetoric, oil production from federal lands and waters has increased during Biden’s presidency, surpassing 3 million barrels per day in the previous year. This level exceeds the peak production during the tenure of President Donald Trump, underscoring the disconnect between political narratives and actual production data.
Complex relationship with OPEC
The United States’ growing prowess as an oil producer may have led some policymakers to contemplate a more assertive stance with OPEC, particularly in areas related to human rights and geopolitical influence. However, the reality is that Washington’s relationship with OPEC remains intricate and multifaceted, irrespective of domestic production levels.
While the United States has become less dependent on Middle Eastern oil, it still views nations like Saudi Arabia as strategic partners. Saudi Arabia plays a pivotal role in representing U.S. interests in the region, and the United States remains a significant supplier of weapons to the kingdom. This interdependence underscores the complexities of managing diplomatic relations, particularly in the context of oil markets.
As the U.S. continues to grapple with the intersection of energy production, global market forces, and political narratives, it becomes evident that addressing the challenges of fuel prices requires a nuanced understanding of the intricate web of factors at play. In an increasingly interconnected world, domestic energy policies are just one piece of the puzzle that shapes the economic and political landscape.
Writing by Moe Khaled; Editing by Sarah White