WASHINGTON — The ongoing threat from Russia invading Ukraine is creating a foreign policy crisis. This conflict also brings into play one of President Joe Biden’s political weaknesses: rising gasoline prices at home.
Americans are already worried by Inflation, which is at its highest level in 40 years. Biden warns that gas prices could rise if Vladimir Putin decides to invade. This is a recognition that Biden faces risks ahead of 2022 midterm elections. Inflation has become a problem for Democrats despite their strong economic growth.
The president stated Tuesday that he was ready to use all of the authority and tools at his disposal to help at the gas pump. “We are taking active measures to relieve the pressure on our energy markets and offset rising costs.”
As Putin gathered forces at the Ukrainian border, the cost of crude oil and gasoline began to rise over the last month. As investors attempt to determine the economic impact of an armed conflict or U.S. sanctions on Russia, the diplomatic back-and forth has thrown off financial and commodity markets.
The U.S. economy is capable of absorbing higher energy prices but American families are seeing dramatic increases in food, energy, and other goods prices. JPMorgan and other investment companies predict that crude oil, currently at $95 per barrel, could rise to $125 per barrel due to tight supply. This would increase if there is an invasion.
Biden wants to focus on the Ukraine situation, which is driving up gasoline prices. However, costs at the pump are already significantly higher than they were a year ago. The U.S. has failed to increase oil production abroad and in the U.S. has struggled to get more.
Due to tensions at home, the Republicans won’t be giving Biden a pass. Senator Republican Leader Mitch McConnell has criticised the president’s higher food and energy prices. He said that the Biden administration seemed less interested in solving the problem than in convincing families that the pain is only in their heads.
A December AP-NORC Center for Public Affairs Research poll found that 85% of Americans had reported higher than normal prices for groceries and gasoline in the past month. In an open-ended survey asking for top issues that the government should be working on, 10% cited gas prices and energy costs as a sign of Biden’s political challenges.
Gerard DiPippo is a senior fellow at The Center for Strategic and International Studies. He said, “Given the current world, any increase in commodities prices, even though that’s transitory,”. It puts the White House in an awkward position.
Jen Psaki, White House press secretary, stated Wednesday that National Security Council Middle East Coordinator Brett McGurk, and Amos Hochstein (the State Department’s energy ambassador), were in Riyadh Wednesday to meet with Saudi officials. She declined to comment on whether the Saudis were pressing them to pump more oil in order to stabilize the global oil market.
Tuesday’s statement by Biden was not specific enough to explain what additional steps his administration would take in order to lower oil prices should the situation worsen in Ukraine. To reduce oil price pressures, he directed the release of an unprecedented 50 million barrels from the U.S. Strategic Reserve in November.
Although gasoline prices fell in the weeks following the release of oil, they have now surpassed the levels that were announced by Biden at the time. If diplomacy fails, he could order another release.
Congressmen are seeking other ways to alleviate the pain.
Democratic Senators. Democratic Senators. This option has not been endorsed by the White House.
Michigan Senator Debbie Stabenow, a Democrat, stated that “what people are focusing upon is what we can immediately do.” “People require immediate relief, so this is a quick-term solution.”
AAA reports that gas prices have risen nearly 40% from one year ago and more then 6% in the last month. The price rises that have occurred in recent months due to Russia’s threat of Ukraine would not be offset by the federal tax being suspended at 18.4 cents per gallon. There is no guarantee that the energy companies will pass on all savings to consumers.
It is also not clear if there is enough support from the Senate to allow a gas tax holiday. Alaska Republican Senator Lisa Murkowski compared it to a “sugar high” which could quickly wear off.
Murkowski stated, “I don’t believe that’s the solution here.” This doesn’t solve people who pay high prices at the pumps. This is not a “we’re going stop you thinking about it by giving your a little bit of an offsetting here.”
Gas prices are not necessarily so high when adjusted for inflation. According to the Energy Information Administration, average prices were generally higher between 2011 and 2014 under Barack Obama’s presidency than during George W. Bush’s second term.
Jason Furman, an ex-aide to Obama, Harvard University economist, and senior fellow at The Peterson Institute for International Economics said that the U.S. economic system is strong enough to withstand higher oil prices. However, some areas of the country may be affected. In fact, higher oil prices could lead to more oil-related investment that could eventually cause prices to fall.
Furman stated that the best decision Biden could make was what he did Tuesday. He warned the American people about the possibility of higher prices if war breaks out.
Furman stated that there isn’t much the president can do. “A certain amount of what President Furman should do is to communicate with people that these events might drive prices up temporarily, and that prices will eventually come back down.”
