Gas prices, perhaps more than unemployment numbers, housing stats, or stock tickers, have a huge effect on the American psyche. After all, even urbanites who don't have to fill their tank regularly notice how gas prices affect the costs of other products and services. So for politicians who want to get on voters' good side—especially in the face of other dismal economic measures—tinkering with oil and gas prices could be a smart move.
That's just what President Obama did. Less than a month ago, on June 23, the Obama administration and the International Energy Agency sent oil markets in an unexpected frenzy after announcing that 60 million barrels of crude oil would be released from its member countries' reserves--half that amount coming from America's own Strategic Petroleum Reserve. But like that frenzy, the effect of the release on gas prices was short-lived.
On the day of the announcement, prices had already been on a downward swing, with regular gasoline averaging about $3.61 nationally, according to the AAA Daily Fuel Gauge Report. After the release—which officials in the Obama administration said was in response to supply disruptions in Libya and in anticipation of summer driving months—gas prices continued to drop for about a week. By July 8, however, prices had already rebounded to the June 23 level. Now, as Libya remains mired in a civil war and summer driving season continues, gas prices have again been on the rise.
This short-term effect raises questions about whether the release of crude oil was worth it in the first place and whether another release might be on its way.
In its July Oil Market Report released last week, the IEA argued that the decision to release from the reserves has been positive so far considering the flexibility it provided to global markets. "Much ink has been spilt subsequently suggesting that the IEA action comes three months too late, depletes emergency stockpiles and has failed to reduce rampant crude and motor fuel prices. However, we feel compelled to point out that critics cannot have their cake and eat it too," the IEA report said.
According to an official from the Obama administration, the IEA will continue to evaluate the impact of the collective release in June before deciding on any next steps.
Robert Dillon, spokesman for Alaska Republican Sen. Lisa Murkowski, says there's already some indication that another crude oil release from the Strategic Petroleum Reserve could be on the way, something that Murkowski isn't happy about. Already a critic of the action, on Tuesday she released a statement questioning whether the original sale of oil from the Strategic Petroleum Reserve violated the country's sanctions on Iran. One of the major purchasers in the sale, Vitrol, has reportedly resumed business with Iran after buying from the U.S. reserves. According to Dillon, much of the sale of reserve oil in June went to the same speculators whom Democrats in Congress have been trying to fight. "If the purpose of this release was to provide much needed relief to American drivers, then clearly the administration has done more harm than good. The only real winners in this sale were the traders, who will sell the oil back to American refiners at a profit," Murkowski said in the statement.
And now, another instance of political posturing in Washington could have a negative effect on gas prices. Fears over a weaker U.S. dollar brought about by the unresolved debt ceiling debate in Washington likely contributed to a rise in oil futures on Tuesday. Since crude oil is traded internationally in dollars, any changes in the value of a dollar brought about by a default could affect oil and gas prices for consumers also.