As gas prices soar to the highest seasonal level in a decade, the domino effect on inflation risks Joe Biden’s chance of re-election.
So White House flack John Kirby casually let slip in India over the weekend that another drain from the Strategic Petroleum Reserve likely is on the table, after the president already drained stocks to a 40-year low to dampen inflation and resuscitate his poll numbers.
Biden is “focused on making sure that the prices continue to come down for the American consumer,” Kirby told reporters at the G20 summit in New Delhi, where Biden shook hands warmly Saturday with the Saudi crown prince he foolishly vilified as a “pariah,” but who holds the key to lower oil prices globally.
“That’s why he has taken steps to shore up global supply, even if that means coming into the strategic reserve,” Kirby said.
The strategic reserve was created in 1974 in reaction to the Middle East oil embargo crisis, when prices spiked and gas was rationed.
It is meant for actual emergencies, not election emergencies for an unpopular, big-spending president who is waging an insane war on domestic fossil-fuel production.
But that’s where we are with the modern Democratic Party. Whatever it takes to cling to power.
Kirby’s remarks coincide with whispers in the hedge-fund community that the administration is enacting a cunning plan to artificially depress inflation before the 2024 election — at the cost of prolonging America’s economic woes and wasting hundreds of millions of dollars.
The way it works is that they are taking hundreds of millions of dollars out of Treasury to steadily buy up oil to partly replenish the strategic reserve over the next few months and then, when they gauge the time is right, politically, they dump it into the market, while prevailing on China to do the same.
Hey, presto, the oil price goes down and soon enough, so does inflation, right in time for the president to declare that Bidenomics is a huge success and coast to victory.
That’s the plan, anyway.
In early July the Department of Energy announced: “A Total of 12 Million Barrels is Slated for Purchase by August 2023 Continuing the Biden-Harris Administration’s Concerted Effort to Replenish Reserve at a Good Deal for American Taxpayers, Maintain the SPR’s Operational Readiness, and Protect the Nation’s Energy Security.”
So far the US has bought 2.9 million barrels of oil for the Strategic Petroleum Reserve during August, according to Department of Energy data, and is expected to by another 3.2 million barrels in September.
They had planned to continue the purchases through October and November but had to cancel after Energy Secretary Jennifer Granholm blabbed that they were looking to buy at $72, and then the Saudis and Russia announced last week they were extending production cuts until the end of the year, meaning less oil on the market, and prices rising above $90 a barrel, back to what it was before Biden drained the reserve for base political purposes.
It’s worth remembering that Donald Trump proposed spending $3 billion refilling the strategic reserve in March 2020, when oil prices were at just $24 a barrel.
But he was blocked by Democrats in Congress, with Sen. Chuck Schumer accusing Trump of fashioning “a bailout for big oil.”
The price of gas is inextricably tied to the price of crude oil, and Goldman Sachs last week predicted the price of Brent crude oil will surpass $107 by December next year.
That’s a hellscape for Biden’s reelection.
When he took office, the national average price of regular gas was $2.39 per gallon.
On Sunday, the national average price for regular gasoline was $3.83, and 3.88 in New York, according to the American Automobile Association.
Pumping up inflation
Higher oil prices don’t just send gas prices soaring at the pump.
They also raise inflation indirectly because crude oil is a key ingredient in plastic, and transportation costs factor into the cost of everything.
A rule of thumb cited by Federal Reserve Chair Jerome Powell last year is that every $10 per barrel increase in the price of crude oil increases inflation by 0.2% and sets back economic growth 0.1%.
None of this ought to matter, considering America has a wealth of “liquid gold right under our feet,” as Trump puts it. “Drill, baby, drill” is how to get energy prices down the right way.
But the White House’s ideological obsession with climate policy at the expense of domestic energy production has placed the economy in a vise.
The only way out for Biden is more smoke and mirrors, and a little help from Wall Street.
Waste taxpayer money to manipulate the global oil market and kick the inflation can down the road, while using threats and precious bargaining chips to convince frenemies like Saudi Arabia not to sabotage his election prospects.
Who cares about the health of the economy, as long as he can hide the truth from voters.