Will the 2022 election be at the pump?
"Peril and politics in the US following the rightward shift in Sweden"
In the first half of 2022, U.S. exports of petroleum products averaged nearly 6.0 million barrels per day (b/d), the highest first-half-of-year exports in Petroleum Supply Monthly data since 1981. … In our September 2022 Short-Term Energy Outlook (STEO), we forecast petroleum product net exports (gross exports minus gross imports) will remain above the five-year (2017–21) average through the end of 2023, suggesting gross exports will remain higher than previous years.
—U.S. Energy Information Administration
Prior to the US presidential election in 2008, I researched the trendline of gasoline prices and discovered that every election year a Bush was in the White House the price of gasoline peaked in early July and then declined sharply to Election Day, rebounding gradually after that. Every year a Bush was outside but wanting to get into the White House, the opposite happened. There was one exception to this, which came in 2004 when Bush-II was trying to defeat John Kerry and prices should have come down but did not.
This linkage between politics and price made some sense if you understood that:
Retail gasoline prices are determined at the oil refinery stage rather than the import price
The Bush family was deeply embedded into the transnational oil industry
As CIA chief, George H.W. Bush would have been well aware of the political impact of the pump price.
George H. W. Bush was a congressman, ambassador to the UN and China, then director of the CIA before becoming Ronald Reagan’s vice-president and heir apparent. The 41st US president, who died in 2018 at the age of 94, founded Zapata Petroleum Corporation, which opened Texas's Permian Basin in 1953. Zapata pioneered offshore drilling and branched out internationally to drill in Kuwait for Shell. With 41 as his heir and confidant, Reagan famously deregulated domestic oil and gas, allowing refineries to set prices according to political winds, meanwhile making oil companies the wealthiest industry and their executives the best paid after hedge fund managers.
Pappy Bush’s final legacy was to get the Republican party to abandon science and attack climate change. He made it impossible for any ambitious Republican candidate to acknowledge global warming even existed for the 30 years (and counting) after he lost re-election in 1992.
A commenter on my 2008 post observed:
Increasingly, average Americans will not be able to afford both fuel oil for heating and gasoline for commuting to work (starting to be felt more in November). When unemployment increases in the ever-worsening global recession, a larger and larger percentage of people will not be able to pay for fuel oil to heat their homes. These realities will shock the nation with big increases in home heating bills this winter (starting in November).
If you fast forward 14 years, November 2022 is shaping up along similar lines. It is not a presidential election year but the combination of the war in Ukraine and declining domestic oil production is putting a squeeze on refineries. Petroleum demand in 2020 and 2021 was much lower than levels seen during the same period in 2018-2019 but 2022 has witnessed a reversion to the mean, ie: exponential growth. Putin’s unexpected invasion, NATO boycotts, and the closing of Russian liquid methane gas pipelines into Europe have set up a winter energy crisis in UK and EU. Londoners were just last week advised by their government to buy sweaters and expect to be wearing woolen caps and leggings indoors this Christmas. Swedes have been told the same for some months now. The Biden Administration promised to fill the gap, and true to its word, has drained the Strategic Oil Reserve and accelerated exports.
U.S. crude oil exports to Europe averaged a record of 1.67 million b/d in May as refiners in Europe moved business away from Russia and started drawing on alternative sources. Similarly, U.S. liquefied natural gas (LNG) exports to Europe increased substantially this year as new sources replaced declining gas supplies from Russia.
—U.S. Energy Information Administration
Those moves had the effect, along with jawboning the refineries and yanking regulations from exploration (ie.: continuation of Bush, Obama and Trump policies), of quickly bringing down US retail gasoline prices, which should help Democrats in the fall elections, if only marginally.
As the European Union prepares to implement a ban on Russian seaborne crude in December, the market will have to prepare itself for a loss of 2.4 million bpd, according to the International Energy Agency (IEA). The ban on Russian crude imports by sea will take 1.4 million bpd of oil off the market, along with 1 million bpd of petroleum products. This is in line with the ban on Russian seaborne crude that goes into effect on December 5th, and the embargo on petroleum products, which goes into effect on February 5, 2023.
—Charles Kennedy, oilprice.com
“Now we will get order in Sweden… It’s time to put Sweden first.”
—Jimmie Akesson, leader of the Sweden Democrats, on Facebook
European sanctions adopted in June 2022 that prohibit imports of crude oil and certain petroleum products from Russia, including distillate fuel oil, will take effect in December for crude oil and in February 2023 for petroleum products. While Europeans are already paying much higher gas prices, that is just the first hull scratch of a huge iceberg. It may be that the September 14 election in Sweden is a forerunner of a larger European political shift to the right.
… [T]he outcome will mean a change of direction for the country, analysts predicted, and it showcased the extent to which the party of the Sweden Democrats, which has worked to rebrand itself from its origins in Nazi ideology, had upended politics in the country.
Democrats do not want to see that political shift play out here. As of mid-September, Biden had been able to drop retail unleaded gas prices to about $3.69 per gallon ($3.12 on the Gulf Coast and $4.82 on the West Coast), down about a buck and a half from the 4th of July to about where prices were before the Ukraine invasion. These prices are still fifty cents higher than a year earlier, however, when Covid was creating an artificial market glut, but for Democrats, the steep decline is good news. Republicans are running on inflation and the stolen 2020 election. Democrats are just trying to dodge the Swedish sledgehammer.
That may come down to prices at the pump.
The trouble is, you can only drain the Strategic Petroleum Reserve once. After that, you’ve nothing left in reserve no matter what your strategy may be.
Meanwhile, in Ukraine news, we should remember that just a week before the invasion, Vladimir Putin visited the Beijing Olympics and took a private meeting with Uncle Xi. Once upon a time, it would be Putin calling the shots in that relationship. Now it was his turn to ask permission. Xi was ambiguous but affirmed the strength of the new Sino-Russia "no limits" partnership. Vlad took that as a symbolic okay, reminiscent of when U.S. Ambassador April Glaspie told Saddam Hussein, “[W]e have no opinion on the Arab-Arab conflicts, like your border disagreement with Kuwait.”
This week Vlad flew to Samarkand to meet once more with Uncle Xi. Backed against the wall in Ukraine, Vlad has to decide whether to cut a deal with NATO (perhaps keeping Crimea in exchange for exiting Luhansk and Donetsk) or escalate, hopefully with “no-limits” ChiCom forces to reinforce his beleaguered battalions.
With public opposition in Moscow and other cities rising, the end of the Ukraine conflict may be in sight, or at least we can hope. But probably not before US midterm elections and Europe’s coldest Christmas.
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