Don’t look now, but oil is heading back toward $100 a barrel. That means rising gasoline prices could be the next big headache for President Joe Biden as he enters election season. That’s on top of the United Auto Workers strike that saw about 13,000 employees walk off the job this morning amid labor negotiations with the Big Three U.S. automakers. Besides causing friction between labor activists and the union-friendly president, an extended strike could increase the cost of cars and exacerbate the inflation that’s gripped the U.S. economy for more than 18 months. Rising fuel costs would make that even worse. Inflation has dogged Biden since he came into office, as the economy was surging from the depths of its Covid-era recession. Republicans flogged Biden last year over high fuel prices, which rose amid Russia’s invasion of Ukraine and the post-pandemic rebound in global energy demand. Biden responded to the political critics and to consumers by greenlighting the record sale of 180 million barrels of oil from the nation’s crude stockpile — more than half the amount of oil now in the reserve — helping fill a dry market and blunt prices. So will the price keep rising? And can Biden escape the brunt of criticism? We asked analysts: Riyadh and Moscow Presidents don’t control oil prices. Demand in major markets like the U.S., China and India are major drivers of price. The chaos-inducing effect of war also can drive prices up. Right now, there are two big reasons for higher oil prices: Riyadh and Moscow, said Andy Lipow, president of Lipow Oil Associates, a Houston oil consulting firm. Both Saudi Arabia and the Russian government said last week they would extend production cuts through the end of the year. The Paris-based International Energy Agency expects a “significant supply shortfall.” That has spooked commodity traders and sent prices climbing. Other factors are the uncertain impact of China’s economic rebound on oil demand and the devastating Libyan flooding knocking out its oil supply. A problem for Biden? Yes, if consumers see higher gas prices at the pump, said Kevin Book, managing director of ClearView Energy Partners LLC, citing data stretching back to the Reagan years. The 2024 presidential election may be a year away, but people are forming their opinions about the state of the economy now, he said. “There's very little that American voters experience more frequently or more poignantly than the gasoline prices,” Book said. “That economic indicator can really leave a mark — even if that mark was six or 12 months ago.” Some voters will also blame Biden's policies — his climate agenda has included curbing the fossil fuel footprint on public lands and off the nation’s coasts — despite U.S. production continuing to rise. “The administration's domestic policy for fossil fuels is the ‘not in my backyard’ philosophy,” Lipow said. Will high prices last? Prices look likely to hold on. Brent crude, the global spot price, is expected to breach $100 a barrel, with the benchmark price of U.S. production floating not far behind, said Lipow. But other aspects of oil pricing could help ease consumer pain. Winter gasoline blends coming online now in parts of the U.S. are cheaper than summer fuels. Lipow expects gasoline to fall by 5 cents to 10 cents a gallon over the next few weeks. “There's going to be some respite,” he said. It's Friday — thank you for tuning in to POLITICO's Power Switch. I'm your host, Heather Richards. Arianna will be back soon! Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to hrichards@eenews.net.
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