The price of gasoline is poised to rise higher in the coming weeks than it has since 2014 – right as this year’s peak driving season approaches.
That increase is fueled by global events largely outside U.S. control. But should President Donald Trump pull out of the nuclear deal with Iran, as he has been itching to do for months, the price at the pump could continue to creep even higher past Memorial Day – potentially presenting more political headaches for Trump and the GOP going into the midterm elections.
On Sunday, the national average gasoline price was about $2.81 per gallon, according to both the American Automobile Association and GasBuddy. As the busy travel weekend approaches, the price could break the $2.90 mark to make for the most expensive summer gas prices since 2014, analysts from both organizations said.
U.S. drivers are being pinched at the pump as the price of oil creeps up globally. The price of Brent crude, a global oil benchmark, grew to $75 per barrel from just under $50 per barrel since the same time last year.
Oil prices have swollen due to a confluence of international factors. The Organization of the Petroleum Exporting Countries (OPEC), a cartel of petroleum-producing nations dominated by Saudi Arabia, has curtailed production for more than a year as that kingdom’s state-run oil company, Saudi Aramco, prepares to sell its shares on the open market as part of an upcoming initial public offering. The higher the price for oil goes, the more valuable the company will be. Saudi Aramco will be the largest publicly traded corporation in the world when it goes public.
Simultaneously, oil production in Venezuela, home to the world’s largest crude reserves, has plummeted during the country’s economic crisis under President Nicolás Maduro. Earlier this year, Venezuela’s oil production hit a three-decade low of 1.6 million barrels a day, according to an OPEC report, as crime grows and workers flee the oil-rich plains of eastern Venezuela.
Nonetheless, the thriving domestic economy has insulated U.S. drivers from much pain at the pump. “With a stronger economy, better wages, consumers have a higher confidence. With that, they are not really blinking twice with the more expensive prices we’re seeing this year,” AAA spokeswoman Jeanette Casselano said.
These geopolitical events alone are not enough drive the U.S. national average above the $3-per-gallon mark, according to analysts from AAA and GasBuddy.com.
“I think we will stop short of that psychological $3 barrier,” said Patrick DeHaan, a petroleum analyst at GasBuddy.com, “of course, barring any unforeseen changes.”
One such curveball is Trump’s decision on Iran.
Though presidents are often blamed by the driving public for high gas prices – just ask Jimmy Carter – there are few levers in the White House with which a commander in chief can control the price set by the global economy for oil.
But the president’s decision on Iran is different. Trump must decide whether to reauthorize the multilateral nuclear pact his predecessor, Barack Obama, negotiated with the Middle Eastern nation.
The Iran nuclear deal works like this: In exchange for Iran submitting to regular international inspections, the United States and other parties ease up on nuclear-related sanctions against Tehran. For the United States to keep its end of the deal, the president must periodically waive nuclear sanctions against Iran, which remain part of U.S. law.
Trump’s next waiver deadline is Saturday. For months, Trump has been reluctant to keep the Iran deal in place – as he has with most of Obama’s policy achievements. The president has elevated Iran hawks John Bolton and Mike Pompeo, hiring the former to be his national security adviser and promoting the latter to CIA director from secretary of state. In January, Trump warned that unless Congress fixes “the deal’s disastrous flaws” he will withdraw from the pact.
Opponents of the deal have turned up pressure on Trump to pull out. Last week, Israeli Prime Minister Benjamin Netanyahu claimed in a televised speech that his country has tens of thousands of documents proving Iran lied about its nuclear-weapons history when it signed the 2016 deal.
If Trump decides to end U.S. participation, that could cause oil prices to rise even more as it becomes more difficult for Iran to sell its oil in the international market.
“The president really has limited control of gas prices,” DeHaan said. But he added: “His rhetoric with Iran is fiery and could push up prices further.”
Trump should be well aware of how critics try to pin blame for high gasoline prices on the president. He did so to Obama in 2012 when the average gas price nearly broke $4 per gallon, suggesting on Twitter the president does indeed have the power to make the price of gasoline obey his wishes:
“Gas prices are about to hit a record high during the Labor Day weekend. @BarackObama could have stopped this.” – Aug. 31, 2012
“Gas prices are at crazy levels–fire Obama!” – Oct. 22, 2012
Throughout Trump’s tenure in office, the nation has enjoyed gasoline prices well below $3 per gallon – something for which Trump has been eager to take credit for on Twitter:
“Gas prices are the lowest in the U.S. in over ten years! I would like to see them go even lower.” – July 4, 2017.
But consumer habits will change “if they climb well into the $3 range nationally,” DeHaan said of gas prices. Above that mark, some lower- and middle-income motorists may cancel summer road trips while wealthier drivers will be more eager to look into buying fuel-efficient vehicles.
One big question for Trump as he contemplates the Iran deal is whether a presumed bump in gasoline prices from pulling out of the pact could change voting habits in November.
Congressional Republicans running to keep their seats hope that delivering a sizable tax cut to voters – the only major legislative achievement for the federal government united under the GOP – will buttress the party against what some expect will be a Democratic wave election. With unemployment low and the economy roaring, the GOP hopes to stave off losses the president’s party usually sees in the midterms following a White House win.
Should the Iran deal end, the higher daily transportation costs may take a bite out of the boon from the tax breaks – and give Democrats another talking point to counter the GOP’s economic narrative.