United States: the price of gasoline continues to drop, a boon for Joe Biden

ÉUSA: gas prices keep dropping, a bargain for Joe Biden

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Gasoline prices in the United States have been steadily falling since an all-time high in mid-June, a welcome development for President Joe Biden, attributed to slowing American demand as well as recession fears. 

Since an all-time high of $5.01 per gallon (3.78 liters) on June 14, the equivalent of $1.32 per liter , the price of regular gasoline remains on a series of 35 days of decline in a row, according to data from the AAA organization.

“I feel better”, reacted Rigobert Fokoua, who was refueling at a station in Rockville, Maryland. “My tank went from $80 to $60. »

For Bill O'Grady, of Confluence Investment, “oil prices have clearly come back down and have taken fuel prices with them”.

Above 120 dollars at the beginning of June, the price of a barrel of West Texas Intermediate (WTI), the benchmark for the US market, fell to $95 in mid-July, before rising slightly this week.

This cooling is due to the fear of a sharp deceleration of the economy, or even a recession, which would contract the world demand for crude oil, but also for refined products, including gasoline.

This This apprehension is largely linked to the marked tightening of monetary policies, with sharp rate hikes by central banks, in particular the United States Federal Reserve (Fed), recalls John Kilduff, of Again Capital.

In the United States, the slowdown in gasoline demand is already palpable. It fell, during the week ended July 8, to its lowest level since the beginning of the year.

“It's a major development,” says Bill O'Grady, “because we were expecting a very big summer season” on the roads, boosted by Americans' appetite for driving, after two years truncated by the coronavirus pandemic.

“Air” for consumers

“I tell myself that demand is falling because consumers are going out less because of the high prices”, which remain more than 40% higher than their level of last year, advances Brendan Anderson, passing through the Rockville station.

But historically, the increase in the price of gasoline has only a marginal effect on demand, reminds Bill O'Grady, who sees another possible explanation: the telecommuting revolution.< /p>

If remote work is now possible, “when the price of gas goes up, instead of going to the office five days, you will only go twice” in a week, he says worth.

“I expect prices to continue to fall through the fall,” says John Kilduff.

The White House on Monday welcomed lower gasoline prices, considered to be a strong psychological indicator for Americans, a setback that gives “air” to consumers.

Joe Biden is held responsible by Republicans and part of public opinion for the surge in inflation , which could weaken the Democrats during the legislative election on November 8.

In a memo, White House communications director Kate Bedingfield highlighted “the historic actions” taken by President Biden to ease oil and fuel prices.

Primarily this is the decision to use an unprecedented amount of US strategic oil reserves, which have shrunk by 136 million barrels since last September.

< p>“The Biden government is doing the right thing (…) by putting oil on the market,” said Lyle Farmer, a lawyer, who was refueling at the Rockville station.

“He there are two ways to respond to the problem”, tempers Bill O'Grady. “The first is to increase supply and the second is to reduce demand. (Biden) has done very little to increase supply and a lot to increase demand” with his strong economic support measures.

For Edward Moya, of Oanda, the recent rise in oil prices is even partly attributable to him, “after President Biden's trip to the Middle East did not result in any commitment” from the Saudis to increase their production.

Supply remains constrained, mainly due to the sanctions imposed on Ukraine.

On Tuesday, crude oil prices rose again, in part because “ the market is worried” that the US president “is due to announce climate measures” on Wednesday, said Phil Flynn of Price Futures Group.

After admitting that it would be impossible for the environmental component of his program is adopted by Congress, Joe Biden thus intends to proceed by presidential decrees.

To calm the price of black gold, his government is currently seeking to put in place a cap on the price of exported Russian oil.

This project, which has received the approval of the G7 in principle but has not yet been detailed, will it will allow Russian oil deliveries to continue while depriving Russia of most of the profits it derives from it.