(RepublicanJournal.org) – President Biden knows that if he’s going to have any chance of being elected for a second term, he needs to get inflation under control. The key is reducing energy prices, because when the rate of fuel goes up, it drags the cost of everything else up too. Unfortunately for the president, there are serious limits to his influence over the price of oil — and now he’s facing an unexpected problem.
Gas Prices Are Still High
The cost of gasoline has fallen a long way below where it was last year. On June 6, the average price of a gallon was $3.553. That’s still more than a dollar above where it was before the pandemic, and bringing it down further is vital if Biden is going to reduce inflation significantly before next November’s election. The problem is that oil is sold on a global market, and prices are influenced by things the president has no control over. One of those is the amount of oil that’s being sold. The law of supply and demand says that if there’s less oil on the market, prices will rise.
Biden’s problem is that while he wants oil expenses to fall, producers want them to rise. Saudi Arabia, one of the largest oil exporters, likes high prices — and, on June 5, oil minister Prince Abdulaziz bin Salman said the country would do “whatever is necessary” to stop the price from falling any further. He also announced that starting next month, Saudi Arabia would cut its output by a million barrels a day, which amounts to around a 1% reduction in total global oil production.
More Problems Could Appear
The global oil market is already under pressure. While Russia still exports it, most western countries capped the amount they’d pay for it at $60 a barrel in December. That’s around $10 below the market price, and while so far it hasn’t stopped Russia from selling the precious commodity, there’s no guarantee sales will continue. The Saudi production cut will definitely put upward pressure on prices, and that added strain will come when US reserves are already low.
Since taking office, Biden has released millions of barrels of oil from our strategic reserves. The move helped bring costs down last year, but it now means we have less of a cushion against production cuts. The really bad news is that the OPEC+ production cartel has been trying to bring in those cuts across the board. So far it hasn’t reached an agreement, meaning Saudi Arabia jumped the gun with a unilateral reduction. If other overseas producers follow the Middle Eastern country’s example, Biden could see inflation rising again — right at the most inopportune time.
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