Press "Enter" to skip to content

Desperate Need for Oil Prices to be reduced

The perils of benchmark Oil Prices lingering over US$75-80 per barrel (pb) for extended periods of time have long been stressed to US presidents by their experts. There will be renewed pressure on President Joe Biden to act to bring Oil Prices down to below the ‘danger’ levels as the Brent and West Texas Intermediate (WTI) benchmarks continue to rocket back beyond that level – and threaten a persistent move even above US$90 per barrel.

There are two risks for a US president if Oil Prices remain above these levels for an extended length of time. To begin with, there is the economic harm that has been done to the United States. As I detailed in my new book on global oil markets, and putting aside the recent mismatch between the oil and gas markets, historical precedent shows that a change in the price of crude oil of US$10 per barrel leads in a 25-30 cent difference in the price of a gallon of gasoline.

Desperate Need for Oil Prices to be reducedThe long-standing rule of thumb is that for every one cent increase in the average price of gasoline in the United States, more than $1 billion in additional discretionary consumer spending is lost each year. Second, the negative economic effects of persistent high Oil Prices, as well as the negative public reaction to sustained high gasoline costs, have harmed the re-election prospects of the current US president and his party.

The ‘danger zone’ for US presidents begins about US$3.00 per gallon, and at US$4.00 per gallon, they are urged to either pack their belongings and flee Pennsylvania Avenue or start a war to deflect public attention.

Be First to Comment

Leave a Reply

Your email address will not be published.