If there’s a single number forecasting President Joe Biden’s reelection odds, it’s the price of gasoline. After a scare, it remains in the safe zone.
Financial markets have tensed up during the last 18 days after Israel killed several Iranian operatives in an April 1 airstrike in Syria. Iran signaled its intent to retaliate, raising fears of a broader Middle East war that could disrupt oil supplies.
The cycle now seems to be complete, with no damage to energy flows. Iran telegraphed an April 13 barrage of missiles and drones fired at Israel, allowing Israel, with American assistance, to shoot down virtually all of them. Israel answered that attack with one of its own on a military facility in central Iran on April 19. But the Israeli attack was modest and did little damage, leaving each side room to say mission accomplished.
Markets, at least, think the first overt shootout between Israel and Iran is over. The “oil market appears to dodge a bullet,” Moody’s Analytics reported on April 19. “A soft Israeli military response to Iran’s weekend attack will arrest the upward momentum in oil prices. We do not expect Iran to retaliate directly against Israel again. This would safeguard Iranian oil exports.”
Oil prices tell the story, and the main takeaway is that there isn’t much of a story. US crude prices drifted up by a few dollars after the April 1 Israeli airstrike, with analysts forecasting oil could easily reach $100 per barrel if Middle East hostilities continued or worsened. After the April 19 Israeli strikes, however, US crude traded at around $83, the same level it was at before Israel and Iran started attacking each other.
Gasoline prices have followed the same trajectory, up about $0.40 per gallon since the start of the year but seemingly stable now at around $3.70. Most importantly, there’s no upward pressure likely to push gas over the crucial $4 barrier. When gas prices start with a 4 or a 5, that tells motorists something’s wrong here.
Israel’s war against the Hamas terrorist group in Gaza continues. Israel and Iran will likely continue the “shadow war” of clandestine subterfuge and proxy attacks that has been going on for decades. But the imminent threat to oil supplies has receded.
It’s a modest win for Biden, who could use it. The largely American technology that enabled Israel and its allies to shoot down some 300 Iranian weapons is underappreciated wizardry that literally lowered the cost of war. Had some number of those Iranian weapons struck Israel and killed its citizens, a symbolic Israeli response would never have sufficed, and the broader Middle East war investors fear would be on.
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Biden undoubtedly lobbied Israel hard to limit its response and find a way out of the shooting war with Iran, as did other world leaders. Israel got the message. Biden, of course, has been less successful at persuading Israel to wrap up its bloody incursion into Gaza and bring some relief to Palestinian civilians caught innocently in the crossfire. That problem continues to dog Biden.
Since gas prices peaked at $5 per gallon in 2022, Biden has worked vigorously to get them down and keep them down, including a soft touch on Iran itself that has allowed the theocratic nation’s oil exports to grow. New sanctions Biden announced against Iran after its attack on Israel targeted drone production rather than oil revenue or infrastructure. Iran supplies 4% of the world’s oil, more than enough to affect prices, especially when there’s a relatively tight supply as we have now. Biden’s not going to interfere with that, at least while running for reelection.
The best Biden can hope for on oil and gas prices is that voters aren’t thinking about them much when they vote in the fall. Gas was cheaper when Trump was president, but not because of anything Trump did. Drillers using new “fracking” technology overproduced for several years, sacrificing profits for growth. That kept prices low, but the industry suffered and then collapsed when COVID hit in 2020 and demand plummeted. Energy producers at every level of the supply chain now safeguard profits, which keeps prices higher.
But energy prices don’t have to be painfully high, and there’s now a good chance this is one problem Biden won’t have to be explaining to voters in the home stretch of the 2024 election. Moody’s Analytics thinks that oil prices on Election Day will be about where they are now, which would keep gasoline comfortably below $4 per gallon. But never discount the odds of other unpleasant surprises from the Middle East.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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