US oil prices have recently jumped above the $80 a barrel mark - the highest level since late 2023, sending worrying signals to the Federal Reserve and overly anxious White House.
The surge in WTI has pushed wholesales gasoline prices up...
And worse, pump prices are set to accelerate even higher in the coming months to an average of $4 a gallon, which would be the highest level since the summer of 2022, according to Bloomberg, citing new data from AAA Automobile Club.
A combination of issues is pressuring futures and pump prices higher, including the transition to summer-grade gasoline and strained domestic refineries, as well as concerns about shrinking global crude product supplies while Ukraine attacks Russian refineries.
As we explained in the note titled "Dominoes Falling As Biden Admin Deals With Twin Energy Crisis In Russia, Middle East," traders have been spooked by refinery outages across Russia due to Ukranian drone attacks. In the Middle East, traders are increasingly worried that Iran-backed Houthis could be several steps away from targeting Saudi refineries.
And now it should make a whole lot of sense why the Biden administration pleaded with Ukrainians to stop drone attacks, along with the White House pushing Vice President Kamala Harris out on ABC News on Sunday to warn Israel publicly not to launch a counteroffensive against Hamas in Rafah - because increased chaos on that side of the world would stoke higher crude prices - and bad timing for the administration, just ahead of the US presidential election in November.
Devin Gladden, a spokesperson for AAA, which tracks gasoline prices, warned higher pump prices will force the working poor to make "lifestyle changes and be a focus in November's presidential election." Higher pump prices will also make Americans realize how much Bidenomics has failed.
Higher pump prices will also complicate the Fed's fight against the inflation monster and likely delay rate cuts this summer, which would undoubtedly upset markets.
This comes as the administration is trying to refill the nation's Strategic Petroleum Reserves after releasing a record amount to control last year's summertime gasoline price surge.
Since the administration is busy refilling reserves, it has exhausted some of its war chest to control price spikes this spring and summer.
"If pump prices keep rising, SPR refills will stop automatically. While one cannot rule out another SPR release, the real sleeper risk is the Biden administration would revive threats to restrain US gasoline and diesel exports, especially if a storm disrupted refining capacity. The market, policy, and geopolitical implications of restricting product exports would dwarf those of the LNG pause. Supersize it and add fries," Scott Modell, CEO at Rapidan Energy Advisors, wrote in a statement.
By Zerohedge.com
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