Posted on 06/05/2022 1:58:00 PM PDT by blam
Since gasoline prices started surging at the end of last year, the U.S. Administration has been saying that it would consider and potentially use every tool at its disposal to lower prices at the pump. The problem for the Biden Administration—and for U.S. drivers—is that there isn’t a short-term solution to skyrocketing gasoline prices that set new record-highs day after day. Every tool at Biden’s disposal has its own drawbacks and political consequences, and every move the Administration is studying is unlikely to dent gasoline prices too much, analysts and White House insiders say.
The only “solution” to record-high gasoline prices is not one U.S. policymakers and consumers would want—a recession. And this is now a distinct possibility, although not a base-case scenario for most analysts.
Still, chances of a recession are rising, investment banks and analysts warn.
JPMorgan Chase, for example, warned just this week that a “hurricane” may hit the economy with the Fed starting to remove liquidity from the system and the Russian invasion of Ukraine that could send oil prices to $150 or even $175 per barrel.
“Right now, it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this,” JPMorgan Chase CEO Jamie Dimon said at a financial conference this week, as carried by CNBC.
“That hurricane is right out there, down the road, coming our way,” Dimon added, warning, “You’d better brace yourself.”
Yet a recession is not inevitable, says Goldman Sachs, for example.
“We believe fears of declining economic activity this year will prove overblown unless new negative shocks materialize,” Goldman Sachs economists wrote in a report dated May 30.
“We continue to forecast slower but not recessionary growth, with a trade-related rebound to +2.8% in Q2 followed by +1.6% average growth over the following four quarters,” Goldman Sachs said.
If the U.S. avoids a recession and a subsequent decline in oil consumption, the Administration doesn’t have the tools to influence the price of oil, which is the single largest determinant in U.S. gasoline price trends.
Sure, the White House praised OPEC+, and Saudi Arabia in particular, after the group, including Russia, decided to accelerate the monthly production increases to 648,000 bpd in July and August, from the 432,000 bpd monthly hike so far.
“We recognize the role of Saudi Arabia as the chair of OPEC+ and its largest producer in achieving this consensus amongst the group members. The United States will continue to use all tools at our disposal to address energy prices pressures,” White House Press Secretary Karine Jean-Pierre said on Thursday.
Yet, the Administration still doesn’t really have “tools” that would cut gasoline prices substantially in America. Global supply is constrained because Europe is now sourcing growing volumes of seaborne non-Russian crude, global refinery capacity has shrunk by a few million bpd since COVID, and fuel inventories in the U.S. are at multi-year lows.
Gasoline prices are the single biggest obsession at the White House right now, with aides considering various measures—from limiting oil exports to easing environmental rules for gasoline content—none of which are going to materially bring down prices at the pump.
“We’re going to take every action that we can that will make a meaningful difference,” a White House official told Politico this week. But the official added,
“While understanding and dealing with the reality that global oil prices and gas prices are controlled by much greater forces than any one person.”
Each option the Administration has been studying comes with its own complicated and potentially painful political drawbacks and tradeoffs, and those options may not even lead to lower gasoline prices, sources with knowledge of the discussions at the White House told Politico.
“What they have is a whole bunch of 10-cent policies,” Claudia Sahm, a former Federal Reserve economist and member of the Obama administration’s Council of Economic Advisers, told Politico.
Meanwhile, the national average gasoline price hit another record at $4.715 a gallon on Thursday. That’s up from $3.041/gal at this time last year.
With less than $0.25 from $5.00, the national average could hit $5/gal around June 17, Patrick De Haan, head of petroleum analysis for fuel-savings app GasBuddy, said on Thursday.
Gasoline at $5 will certainly be politically painful for the Biden Administration. Yet, the only short-term “fix” for this is a slump in oil demand through a recession—an even more painful outcome for the economy, employment, and consumers.
I’ve adjusted my driving habits very significantly in the past couple of months - no jackrabbit starts, trying to time red lights, no unnecessary trips to town, etc. It amazes me to see how many folks DON’T do this.
This is an Easy Fix, REVERSE Every last thing you have done since installation as the Puppet.
Actually there is. Oil is a futures commodity. The actions of Biden raised futures prices.
So, reverse them all and open up more US oil and the price would start dropping at the pump significantly.
Those people need to go places. They’ll just have less money for other essentials – queue the need for more social programs and services, i.e. taxes.
Takes me a month to use 14 gallons. And I’ve always got $1 or more off a gallon through Kroger or convenient store points.
Everything I need is within a 2 mile radius, even work.
But even $4.79 a gallon is ridiculous.
Trump lowered the prices once, he can do it again.
Um, we were energy independent and gas prices were markedly better just 1.5 years ago. I wonder what’s different?
It depends on the meaning of “Immediate.” L.G. Brandon’s actions drove the price sky-high in 12 months. Trumps actions brought the price WAY down inside 24 months on the job.
we are trying to cut back on trips to town (and are succeeding) and we top off the tank on every trip
Our heating tank was half full, and we topped it off last week at a cost of 730 dollars. Now that HURT.
Shouldn’t there be dancing in the streets and endless celebrations ? This IS what was voted to be …..
So, they created scarcity in the oil market and crippled the supply of gas.
Think of all the summer vacations, tourism, and trips to relatives that have been cancelled, and think of all the restaurants, hotels, and bars that will see reduced traffic as well.
I've got nice properties around me that have been vacant for two years. Landscapers still come.
What little I see looks like a lot less RVs traffic. But I put on less than 500 mi. last year. No reason our mileage will exceed 350 miles this year, lol. Good Lord willing and the creeks don't rise.
On Fox’s Maria Bartiromo we saw Wyoming Senator, John Barrasso, Senate Conference Chair spell out why the gas prices are intentional. See his interview here starting at 13:50:
https://www.youtube.com/watch?v=FjhH0ihef1o
You might want to watch the entire show from the above link.
Gas prices would start to fall immediately. All Biden would have to do is signal that The U.S. was going to vastly up production.
Venezuela by 2024…..China. Will collapse the dollar soon….
Topped $5 in much of NJ today. I saw it at over $6 in several gas stations in Montgomery County, PA.
Let’s go back a step further. Let’s not install the puppet
I guess mean tweets kept prices lower...
You are exactly what the Democrats want in all Americans. They don’t want any of us to stray more than two miles from where we live.
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