Oil may power White House race

US oil prices, which recently hit a record high of $1.78 a gallon, could influence the race for the White House later this year.

    For Bush, gas could become a liability

    While no one is suggesting that gas prices will be the number one issue in this year’s campaign, many experts said it could become a political liability for the Bush administration if the overall economy is stagnant.


    "In an election year, oil becomes a very political issue and the price of oil is very political because it’s a concrete indicator of what’s going on in the economy," said Michelle Billig, an international affairs fellow at the Council on Foreign Relations and a former international policy adviser at the Department of Energy.


    Unlike the unemployment rate, high oil prices affect the pocket books of most Americans, many of whom suffer financially when forced to pay more to drive their cars, Billig said.


    "If they have to spend more on gasoline they have less to spend on other things," she said. "This is something they see every week when they go to fill their tanks."




    With the summer driving season approaching and fewer people flying airplanes because of a fear of attacks, many energy analysts predict that gas prices will jump even higher over the next several months.


    Barring a dramatic increase in job creation, such potential price spikes could spell trouble for President George Bush.


    Tough race for the White House

    "Voters vote with their pocket books and if they’re angry and gasoline prices are $3 a gallon they’re going to want someone to blame," said Phil Flynn, an energy analyst at Alaron Trading Corp.


    Other economic developments could offset the potential damage from price increases, experts said.


    In March, the jobs market grew by more than 300,000 jobs, according to the Department of Labour. If that growth develops into a trend, gas prices could become less relevant. 


    "Much depends on whether that particular development, high gas prices, fits into an overall dreary economic picture," said Charles Jones, a political expert at The Brookings Institution, a Washington thinktank.


    The high price of crude oil, currently $37 a barrel, is a big reason for high gas prices.


    A confluence of factors is responsible for expensive crude, particularly the rising global demand in countries such as China, Flynn said.


    As China’s economy has opened up, its energy needs have soared and far more of its citizens are driving cars than ever before. 


    "China has gone from an oil exporter to an oil importer," Flynn said.


    Rising demand


    Most Americans depend on
    private transport methods

    US consumers are also using more gas because of an ongoing fascination with sports utility vehicles that require more fuel than normal-sized cars.


    In addition, recent laws passed in states such as California and New York that require the use of ethanol as a chemical additive in gasoline instead of MTBE, have created distribution problems in certain states, Billig said. 



    "There is a real segmentation of the US gas market," she said. "Different regulations in different states only allow certain types of gas."


    So far, the infrastructure is not in place to distribute the proper gas to the appropriate states, something that has contributed to shortages, Billig said.


    "Different states need different types of gasoline and the refining network is not quite set up to deliver that," she said.


    OPEC factor


    Then there is the OPEC factor. The Organisation of the Petroleum Exporting Countries recently approved a decision to reduce production by one million barrels a day, something the White House criticised as harmful to "American consumers and our economy".


    Frank Verrastro, director of the energy programme at the Centre for Strategic International Studies, said the governments of Saudi Arabia, Kuwait and the United Arab Emirates have offered assurances to the Bush administration that they "wouldn’t allow a shortage to develop".


    Yet, at a time when oil prices are already high, a supply reduction will not help lower US gas prices, several analysts said.


    "Much depends on whether that particular development, high gas prices, fits into an overall dreary economic picture"

    Charles Jones,
    political expert, The Brookings Institution, Washington

    "The thing with OPEC is that obviously they should be pumping more oil," Flynn said. "They have contributed to higher prices."


    Others said the impact of OPEC on the global oil market is overstated and that high crude prices were the result of several contributing factors, including the market uncertainty created by tenuous political situations in Iraq and Venezuela.


    That has not stopped Senator John Kerry, the presumptive Democratic presidential nominee, from criticising President Bush for what Kerry has repeatedly described as a failure to pressure OPEC into producing more oil, not less.


    Kerry also has said the US should suspend replenishing the Strategic Petroleum Reserve until prices rebound. 


    The Bush administration has fired back at Kerry by accusing him of supporting a 50-cent oil tax in 1994 and criticising his opposition to new domestic drilling in parts of Alaska and elsewhere. 


    The political ramifications of the debate will play out on a state-by-state basis between now and the election, Jones said.


    While the average price of oil across the country is nearly $1.80 a gallon, drivers in California are paying more than $2 a gallon to fill their tanks.

    The issue could reverberate more in swing states such as Ohio and Michigan, where job losses have been steep.  

    SOURCE: Aljazeera


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