If Election Day were in September, gas prices would be a major liability for President Obama. But with several weeks until voters hit the polls, Obama may get a break on the one product whose price influences consumers the most.
There's been an unusual surge in gas prices this month, with the average pump price hitting $3.86 per gallon, according to AAA. That's just shy of the peak price for the year, which was $3.88 back in April. Prices are up about 14 cents per gallon from a month ago, and 26 cents from a year ago.
That's odd, because gas prices tend to drift down in the fall, since fewer people drive for vacations and demand for fuel dips. In 2011, gas prices fell by about 20 cents per gallon from early September to early October.
As is often the case when gas prices rise, there are a variety of causes. The price of oil, which accounts for up to half the cost of gasoline, has risen from about $84 per barrel at the beginning of June to $100 or so now. One thing pushing oil prices up: Fresh central-bank stimulus programs in Europe and the United States. Worries about unrest in the Middle East and saber-rattling by Israel over Iran's nuclear program may also be creating a "fear premium" that pushes prices higher.
Rising gas prices also reflect the impact of Hurricane Isaac, which forced the closure of some Gulf-coast refineries in late August. That cut into gasoline inventories, pushing prices up.
Soaring gas prices hurt the economy in a couple of ways. Since drivers have to pay more for fuel, they have less to spend on other stuff. Higher gas prices also bum consumers out, since they're displayed so prominently and bigger numbers cause rising anxiety. Economists at forecasting firm IHS Global Insight found recently that every 10 percent rise in the price of gas reduces consumer confidence, as measured by a variety of indexes, by about 1.5 percent.
The inverse is true as well, however, and rising gas prices now could produce falling prices—and more upbeat consumers--by election day. With the Gulf Coast refineries back online, inventories are being built back up, which should ease pressure on prices. Refiners also begin to substitute cheaper blending components around the middle of September every year, as it gets cooler and gas is less likely to evaporate from holding tanks.
The Federal Reserve's latest stimulus plan—dubbed QE3—may affect gas prices as well. By essentially printing money, the Fed lowers the value of the dollar, which makes oil—priced in dollars—more expensive to consumers whose currency is the greenback. In other words, Americans. That may already have helped push gas prices up. But the Fed isn't likely to do any more easing for a while, and if the effect of QE3 fades, as some economists expect, gas prices could fade along with it.
The bigger risk for Obama may be some sort of external event—such as a military confrontation with Iran—that shocks global oil markets. But Obama himself has some say over what is likely to happen with Iran, and any controversial action (at least by America) seems unlikely before the election. November 6, in fact, might be an excellent day to top off the tank.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.