There is one potential silver lining for President Barack Obama amid stock market volatility, the first-ever downgrade of the nation’s credit rating by Standard & Poor’s and a slowing economy: falling oil prices.
“This is really the classic good-news, bad-news story,” said Stuart Rothenberg, editor of the Washington-based Rothenberg Political Report. “Oil prices are politically important because, for consumers, they’re one of the obvious indicators of prices in general and how far their dollar is going to stretch.”
Obama has repeatedly cited the high cost of fuel as one of the “headwinds” against the recovery. In June, with oil topping $90 a barrel as turmoil in Libya squeezed supplies, Obama announced he would act in conjunction with 27 other nations and release crude from the nation’s Strategic Petroleum Reserve. The move had a short-lived impact on prices as oil swung above $99 a barrel in July before declining earlier this month.
Gasoline futures fell yesterday to a five-month low in New York and crude oil tumbled 2.5 percent to the lowest level since September after the Federal Reserve said the economic recovery is “considerably slower” than anticipated.
Crude for September delivery dropped $2.01 to $79.30 on the New York Mercantile Exchange, the lowest settlement since Sept. 29 a year ago. Futures have fallen 17 percent in August and 13 percent this year.
The price for regular gasoline at the pump, averaged nationwide, has fallen to $3.652 a gallon from $3.70 a week ago, according to AAA data. Prices have dropped every day except one since July 29.
“If there’s one bright spot in the economy, it’s the fact that oil is off significantly,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “Lower oil prices mean lower prices at the pump and that is good for consumers.”
To be sure, while consumer confidence moves closely with the price of a gallon of gas, the drop in oil prices is less a sign of strength than it is an indicator of slowing growth in demand and concerns that the economic recovery is stalling.
While gasoline prices are still up about 33 percent compared with a year ago, they will continue to fall if oil is trading in the range of around $83 a barrel, said Frank Verrastro, an energy policy staff member in the Carter administration and now director of the Energy and National Security Program at the Center for Strategic and International Studies in Washington.
With jobs and the sagging economy shaping up to be the dominant issues in the 2012 presidential campaign, that may not be enough to erase voters’ economic concerns.
“There’s no question when people feel better, even if their paychecks are stagnant, when watching those gas prices tick down at the pump,” said Jared Bernstein, who was Vice President Joe Biden’s chief economic adviser until April. “But the state of the labor market -- specifically jobs and paychecks -- dominates right now. So, it’s a rough go for working families.”
The unemployment rate in July was 9.1 percent and the administration forecasts it will be above 8 percent when voters go to the polls for next year’s election.
As part of his broader economic message, Obama has focused on the need to reduce dependence on foreign oil and create new clean-energy jobs. After spending much of the last several months mired in negotiations to raise the debt ceiling, Obama is trying to refocus his administration’s efforts on job creation with many events tied to energy.
“For the last few months, gas prices have just been killing folks at the pump,” Obama said on July 29 in Washington, announcing new fuel efficiency standards for vehicles.
Obama canceled an event planned for today, at which he was set to announce efforts to improve tractor-trailer fuel economy, in order to travel to Dover Air Force Base in Delaware for the return of the bodies of special operations troops killed Aug. 6 in Afghanistan. On Aug. 11, Obama is scheduled to tour an advanced battery facility in Holland, Michigan, to highlight technology that can boost the U.S. auto industry and help automakers meet higher fuel economy standards.
Still, the average American looking at the economy may not find as much comfort in lower gas prices than they would have in years past, said Frank Newport, editor-in-chief of the Gallup Poll in Princeton, New Jersey.
“In the darkness, a little candle certainly is better than nothing,” he said. “When we say what’s the most important problem facing the country, jobs and the general economy swamp the price of gas.”
To contact the reporter on this story: Julianna Goldman in Washington at firstname.lastname@example.org