Ukrainian soldiers practice firing live ammunition near the town of Chuguev, in case Russia invades. (AFP via Getty Images)
WASHINGTON – With Russia’s continuing threat to invade Ukraine, a foreign policy crisis is colliding with one of the President Joe Biden’s Political loopholes: Petrol prices rise in the country.
Americans have been dismayed by inflation at a 40-year high, and Biden is warning that gas price could be higher if Russian President Vladimir Putin chooses aggression. It’s Biden’s own admission of risks ahead of the 2022 midterm elections: Inflation has become a seagull for Democrats despite the nation’s strong economic growth in 2016. last.
“We are prepared to deploy all the tools and powers at our disposal for gas pump relief,” the president announced Tuesday.
Prices of crude oil – and gasoline – began to rise over the past month as Putin concentrated his forces on the Ukrainian border. The reciprocal diplomacy has rattled financial and commodity markets as investors try to price in what an armed conflict and US sanctions on Russia would mean. to the global economy.
Although the broader U.S. economy can absorb higher energy prices, American homes have seen the prices of food, energy, and other goods skyrocket. Forecasts from JPMorgan and other investment firms suggest that crude – already around $95 per barrel – could exceed $125 per barrel due to tight supply, and an invasion will intensify.
Biden wants to focus on how the situation in Ukraine is contributing to higher gas prices, but pump costs are already significantly higher than they were a year ago. Efforts to increase oil production in the US and abroad have largely failed.
Related:
Republicans certainly won’t let Biden pass due to overseas tensions. Senate Republican Leader Mitch McConnell criticized the president for higher food and energy prices, saying that “the Biden administration seems less interested in trying to solve this problem than in trying to convince families that the pain is only in their heads.”
In a December poll by the AP-NORC Center for Public Affairs Research, most Americans — 85 percent — said they’ve experienced higher-than-normal prices for both groceries and gas in recent months. And in an open-ended question about the top issues the government is addressing, 10% named gas prices and energy costs, a sign of the political challenge facing Biden.
“Given the world we are in, any increase in commodity prices, even if it is temporary, even if the Federal Reserve generally tries to consider supply shocks clearly in the past to make its decisions, which adds to the policy conundrum,” said Gerard DiPippo, a senior fellow at the Center for Strategic and International Studies. “It puts the White House in a bind.”
White House press secretary Jen Psaki said on Wednesday that National Security Council Middle East Coordinator Brett McGurk and State Department energy envoy Amos Hochstein were in Riyadh on Wednesday. to meet Saudi officials. She would not comment on whether they would press Saudi Arabia to pump more oil to help stabilize global oil markets.
On Tuesday, Mr. Biden did not say what additional steps his administration would take to lower oil prices if the situation in Ukraine deteriorated. In late November, he ordered the release of a record 50 million barrels of oil from the US strategic stockpile to relieve price pressures.
Gasoline prices fell in the weeks after the oil was released, although prices were already sky-high by the time Biden announced the price cuts. He could order another release if diplomacy fails to get the Russians to withdraw.
Members of Congress are looking for other ways to ease the pain.
Democratic Sense. Mark Kelly of Arizona and Maggie Hassan of New Hampshire – both running for re-election – have called for a suspension of the federal gas tax. The White House has yet to confirm or rule out this option.
“What people are focusing on is what we can do right away,” said Michigan Sen. Debbie Stabenow, a Democrat. “People need relief right now, so this is a short-term way to do it.”
Gas prices are up nearly 40% from a year ago and more than 6% in the past month, according to AAA. The suspension of the federal tax of 18.4 cents/gallon will not offset the price increase that occurred recently when Russia sanctioned Ukraine. And there’s no guarantee that energy companies will pass all the savings on to consumers.
It’s also unclear whether there is enough support in the Senate for the gas tax holiday to continue. Republican Senator Lisa Murkowski of Alaska called it a one-time “sugar high” that can quickly disappear.
“I don’t think that’s the solution here,” says Murkowski, “It doesn’t solve the problem for those who bid high for the pump. This is a ‘we’ll stop you from thinking about it by giving you a little offset here.’
Adjusted for general inflation, gas prices don’t have to be that high. Average price was generally higher from 2011 to 2014 in By Barack Obama President and during the second term of George W. Bush, according to the Energy Information Administration.
Jason Furman, a former Obama aide, Harvard University economist and senior fellow at the Peterson Institute for International Economics, thinks the US economy is at a point where it can withstand higher oil prices, even though even though the country’s pockets could be hurt. In fact, high prices will lead to more oil-related investments which may eventually drive prices down.
Furman said the best option Biden could make was what he did on Tuesday, warning the American people that prices could rise if war broke out.
“There’s not much the president can do,” Furman said. “Some of the things the president should do is balance out to people that these events can cause prices to rise temporarily and prices to fall again.”
