Oil economics could sway the US election – Asia Times

Like no other bounded natural source, fuel continues to have an impact on global politics and economics. In the 2024 US national vote, the proper product will be an important regional problem.

The US has a specially close connection with the black thing because it is the biggest oil producer and consumer on earth. The applicants are aware of this.

Donald Trump has promised to “drill, drill, drilling” and apparently courted the financial support of business giants. The tycoons have responded by donating US$ 7.3 million to Trump’s battle, which is three times the amount needed for his 2020 bid.

However, Joe Biden’s clean energy policy and different legislative initiatives have attempted to lessen reliance on fossil fuels. He has also overseen a rise in home oil production and promised to keep gas prices low for drivers at the same time.

In the US, a nation whose love affair with vehicles is well-known, it represents an important claim. Auto dominance has increased as a result of out-of-town shopping centers, protracted routes, and a lack of federal funding for public transport, with many cities built around massive road networks.

Therefore, it may not seem surprising that pumps rates have a major impact on voter behavior. Research has also demonstrated that oil prices have an “outsized impact” on consumer sentiment and prices expectations. As gas prices rise, confidence in the economy declines.

And while many European and Asian nations have switched to alternative energy sources, the US still relies heavily on fossil fuels for transportation. Electric models make up only 8 % of vehicles sold in the US, compared to 21 % in Europe and 29 % in China.

The Democratic party may be seriously concerned about any increase in fuel costs ahead of the US summer “driving time,” when holidays and better temperature encourage more road journey and fuel usage is estimated to be 400, 000 barrels per day higher than other times.

However, it’s also true that anyone in the White House has a limited ability to affect gasoline prices. The cost of crude oil, whose price is determined by international markets, accounts for about 50 % of the pump price.

The US continues to trade its oil around the world despite producing enough domestic oil to cover its consumption. Congress passed legislation in 2015 to ease the country’s four-decade restrictions on US crude oil exports, allowing US companies to sell their products to the highest international bidder.

Some US refineries can only handle a certain type of crude oil, which must be imported, to complicate matters further. A US president is not in charge of any international events or decisions regarding foreign production.

In fact, political crises in other oil-producing regions have contributed to oil price spikes, which show how continued dependence on oil, whether domestically produced or imported, leaves the US vulnerable to global market shocks, which could in turn affect electoral outcomes.

The Republican party used a rise in gasoline prices to criticize Biden’s environmental policies, which had reduced domestic oil drilling and ended drilling leases in the Arctic, following Russia’s full-scale invasion of Ukraine in 2022 and production cuts from countries like Saudi Arabia in 2023.

Big oil, little oil

Domestic oil and gas regulations have a role to play, as oil producers make up a significant body of influence in the US, even though the US president has little control over the fuel prices that voters pay.

The US oil industry is unique among oil-producing states in that it is dominated by a sizable number of small independent producers who make money from the extraction and sale of oil from their land, aside from the large corporations that support Trump.

Petrol pump screen with sticker of Joe Biden and the words 'I did that'.
Some campaigners attribute Biden’s blame for pump price increases to Biden. Photo: ZikG / Shutterstock via The Conversation

In most oil-producing countries, subsurface oil is owned by the state.

However, in the US, the private landowner owns the mineral rights, which allow oil companies to drill on their property. In 2019, there were 12.5 million royalty owners in the US. Around 9, 000 independent fossil fuel companies operate alongside them, which account for 3 % of the country’s oil and provide 4 million jobs and contribute 3 % of GDP.

Those companies drilling on state-owned land pay a royalty rate to the government, which up until recently was as low as 12.5 % of the subsequent sales revenue. Biden’s decision to raise the rate to 16.67 % did not go down well with oil producers.

Despite that rise and Biden’s commitment to advance the US energy transition, the expansion of the domestic oil and gas industry has continued under his leadership. US oil production increased to an unprecedented level in 2023, reaching 12.9 million barrels per day, and forecasters project a 2 % increase in production in 2024.

Rising US oil prices may support the Democrats ‘ campaign for re-election, but rising gasoline prices will not, despite the fact that their levels depend on much more than Biden’s energy policies. Instead, it might be that oil markets ‘ global economics influence the outcome of voters ‘ ballots and determine who wins and who loses in November 2024.

Emilie Rutledge is senior lecturer in Economics, The Open University

This article was republished from The Conversation under a Creative Commons license. Read the original article.