Biden's foreign policy and oil prices
4 Min Read
If there is a possible Russian invasion of Ukraine, US gas prices will spike amid the highest inflation in decades, wipe down the stock market, and provide Republicans with a new target.
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US President Joe Biden
In light of the Ukrainian crisis, US President Joe Biden's political vulnerabilities are colliding with the foreign policy crisis. The US is witnessing a spike in gas prices.
Americans are already concerned about rising inflation, which is at a 40-year high, and Biden is warning that "if Russian President Vladimir Putin chooses to invade," gas prices might rise even more. It's a realization of Biden's dangers ahead of the 2022 midterm elections.
“We’re prepared to deploy all the tools and authority at our disposal to provide relief at the gas pump,” the US president declared on Tuesday. “We are taking active steps to alleviate the pressure on our energy markets and offset rising prices.”
While the US announced an alleged military Russian buildup on the Ukrainian border, the price of crude oil — and gasoline — began to rise during the last month. As a result of the diplomatic back-and-forth, investors are attempting to price in what a military clash and US sanctions against Russia may mean for the global economy.
What could this mean for the global economy?
Despite the fact that the US economy as a whole can absorb increased energy prices, American families have seen significant price rises in food, energy, and other items. According to JPMorgan and other investment organizations, crude oil prices, which are currently about $95 per barrel, might rise to $125 per barrel because of restricted supplies, which an invasion would exacerbate.
Biden wants to emphasize how the Ukraine crisis is contributing to rising gas prices, although prices at the pump are already significantly higher than they were a year ago. Efforts in the United States and elsewhere to increase oil output have mainly failed.
Due to international tensions, Republicans will not give Biden a pass. Mitch McConnell, the Senate Republican leader, blames the President for rising oil and food prices, maintaining that "the Biden administration appears less interested in attempting to fix this problem than in trying to persuade Americans the suffering is only in their heads."
In a December AP-NORC Center for Public Affairs Research poll, the majority of Americans (85%) said they'd paid more for groceries and petrol than normal recently. In an open-ended question about the government's top issues, 10% mentioned gas prices and energy expenses, indicating Biden's political dilemma.
“Given the world that we’re in, any increase in prices of commodities, even if that is transitory, even if the Federal Reserve generally tries to look past obvious supply shocks in making its decisions, it 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.”
Should the situation in Ukraine worsen, Biden would not specify what steps his government would take to lower oil prices. To relieve price concerns, he ordered the release of a record 50 million barrels of oil from the US strategic reserve in late November.
Prices of gasoline fell in the weeks after the oil was freed, but they have subsequently surpassed those seen when Biden announced the drawdown. If diplomacy fails to persuade the Russians to back off, he may order another release.
General inflation, gas prices
Gas prices aren't necessarily that high when adjusted for inflation. According to the Energy Information Administration, average prices were generally higher from 2011 to 2014 during Barack Obama's administration and George W. Bush's second term.
The US economy, according to Jason Furman, a former Obama advisor, Harvard University economist, and senior fellow at the Peterson Institute for International Economics, is at a place where it can sustain increased oil costs, albeit portions of the country may suffer. High prices would encourage more oil-related investments, lowering prices in the long run.
The best choice Biden could make, according to Furman, is what he did on Tuesday, warning Americans that costs could soar if conflict breaks out.
“There’s just not a lot that the president can do,” Furman said. “ A certain amount of what the president should do is level with people that these events may drive prices up temporarily and that prices will also come back down.”
