Gasoline's drop toward $3 boosts Obama

Republican criticism of the president's energy policies has faded as oil prices have fallen and stockpiles have ballooned.

By MSNMoney partner Jul 3, 2012 1:08PM

By Mark Shenk and Paul Burkhardt


U.S. gasoline prices at the pump, headed to $4 a gallon in April, are dropping toward $3 as the July Fourth holiday approaches, giving consumers relief and a boost to President Barack Obama's re-election campaign.


Retail prices have fallen 15 percent to $3.329 from a peak of $3.936 on April 4, according to Heathrow, Florida-based AAA, the largest U.S. motoring group. They're also 6.6 percent lower than a year ago, underscoring how slowing economies are sapping demand even as an embargo on Iranian oil starts.


Republican criticism of Obama's energy policies has faded as oil fell as much as 29 percent from this year's high in February and stockpiles ballooned to the most in 22 years. Americans bought less gasoline in the four weeks ended June 26 than a year earlier even as prices dropped, MasterCard Inc. data show. Last month, the Federal Reserve cut its estimate for U.S. growth, Spain became the fourth euro-region country to seek an international bailout and China's manufacturing shrank.


"Two months ago, the Republicans in Congress were trying to place blame on the administration for the high energy prices, and, boy, you haven't heard that in a month now," said Bruce Oppenheimer, a Vanderbilt University professor who has studied energy and politics. "All of a sudden, it went from the front burner, to the back burner, to off the burner."


August gasoline futures on the New York Mercantile Exchange dropped 0.79 cent to $2.6239 a gallon yesterday, down 23 percent from the March 26 high for the year. Prices were as much as 4.1 percent higher today at $2.7317.


Crude for August delivery rose as much as 5.1 percent today to $88.04 a barrel after sliding to an eight-month low of $77.69 on June 28. Oil futures surged to $109.77 on Feb. 24, highest settlement price since May 3, 2011.


Gasoline at the pump, averaged nationwide, was last below $3 a gallon in December 2010. Prices would need to drop a further 9.9 percent to reach that level, based on AAA data. There is about a 27 percent chance that retail prices will be below $3 in September, the Energy Department said in its June 12 Short-Term Energy Outlook.


Pump prices are down from $3.565 a gallon a year ago, AAA data show. Prices declined 8 percent during the second half of 2011 to end the year at $3.278.


Mitt Romney, Obama's Republican challenger, said in a March 18 "Fox News Sunday" interview that there's "no question" Obama was to blame for rising gasoline prices. In a Gallup poll taken June 22-28, Obama led Romney 48 percent to 43 percent. On April 12-16, Romney led Obama 48 percent to 43 percent.


Relief at the pump isn't being shared equally. The average retail price in California is $3.741 a gallon after rising to $4.231 a month ago, according to AAA. Gasoline in Alaska and Hawaii is still above $4, while at the other extreme a gallon in South Carolina will set motorists back $2.915.


"The selloff has been driven by the crude market," David Greely, head of energy research at Goldman Sachs Group Inc. in New York, said in a June 27 telephone interview. "Oil's down because of concerns about global growth. The U.S. and Chinese economies appear to be slowing, the European debt crisis continues."


Crude in New York reached its 2012 peak as tension flared between Iran and Western nations over the Islamic republic's nuclear program. In April, representatives from the U.S., Russia, China, the U.K., France and Germany held their first talks with Iran on its atomic program in 15 months.


Brent oil for August settlement fell 46 cents, or 0.5 percent, to $97.34 a barrel yesterday on the London-based ICE Futures Europe exchange, down 13 percent from a year earlier. The grade was up $3.39, or 3.5 percent, to $100.73 at 10:26 a.m. New York time today. The contract is used to price more than half the world's oil, including crude from Europe and West Africa refined on the U.S. East and Gulf Coasts.


Crude output from Saudi Arabia, the world's biggest oil exporter, surged this year before the July 1 implementation of European Union sanctions on Iran. The desert kingdom pumped 9.9 million barrels a day in May, the highest level since at least January 1989, according to data compiled by Bloomberg.


"Iran was the big deal," Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion, said in a June 25 telephone interview. "We peaked out a month early because what happened with crude."

The Fed estimated on June 20 that U.S. gross domestic product will grow between 1.9 percent and 2.4 percent this year, down from 2.4 percent to 2.9 percent forecast in April. Spain on June 25 requested 100 billion euros ($127 billion) in loans for its ailing bank industry, while an index of Chinese manufacturing slipped to 48.2 last month from 48.4 in May, HSBC Holdings Plc and Markit Economics said yesterday.


Rising domestic and Canadian oil production from shale and tar sands boosted U.S. crude inventories to 387.3 million barrels in mid-June, the highest level since July 1990, according to the Energy Department.


U.S. refiners operated at 92.6 percent of capacity in the week ended June 22, the most since July 2007. Gasoline demand averaged 8.83 million barrels a day in the four weeks ended June 22, down 4.8 percent from the same period last year.


"The fall in gasoline is a side effect of the diminished economic outlook," John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund, said in a June 26 telephone interview. "The relief should continue given that refineries are operating at more than 90 percent of capacity even though demand is weak."


U.S. gasoline consumption typically peaks between the Memorial Day holiday in late May and Labor Day in early September, when Americans traditionally take vacations.


"We've already seen the peak gasoline price for 2012, unless there is some geopolitical event," Guy Caruso, a senior adviser for energy and national security at the Center for Strategic and International Studies in Washington, said in a June 26 telephone interview.


The gasoline market in New York, the delivery point for Nymex futures, remains vulnerable to price increases because of refinery shutdowns, Kilduff said. The region, which lost about 700,000 barrels a day of capacity on the East Coast and in the Caribbean, was in danger of losing its largest fuel producer as Sunoco Inc. (SUN) sought a buyer for its Philadelphia plant.


Sunoco and Carlyle Group agreed to form a joint venture to keep the 330,000 barrel-a-day refinery open. Delta Air Lines Inc. bought the idled Trainer refinery April 30, which will bring back 185,000 barrels a day of capacity to the region.

April Prices


"April was a combination of factors that don't exist in the current market," Sander Cohan, a global transportation- fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts, said in a June 25 telephone interview. "You had a lot of capacity offline and fear that the East Coast wasn't going to get supplies it needed."


For all the forecasts for price declines, cheaper gasoline may spur a revival in demand, said Bill Compitello, managing director of retail fuels, supply and trading at Pennsylvania- based Wawa Inc., a gasoline retailer with 312 outlets.


"We're seeing an uptick in demand from where we were and I think that is price-driven," Compitello said.


The Energy Department increased its forecast for consumption this year by 0.2 percent on June 12.


Oil in New York is forecast to average $102 a barrel in the third quarter, according to the median of 34 analysts estimates compiled by Bloomberg over the past year.


The crude oil bear market is ending and with it the drop in motor fuel prices, said Mike Wittner, head of oil-market research at Societe Generale SA in New York.


"We expect crude prices to stabilize and I don't expect much of a change" in the profit refiners make from producing motor fuel, Wittner said. "So gasoline should stabilize as well."

More from Bloomberg
....a boost only from those with memories too short to recall that gasoline was below $2 a gallon when Obama took office.  The only reason gas is coming down is the poor jobs picture.  80,000 or fewer jobs created each month translates into just 1,600 job opportunities PER STATE, and Obama calls this a step in the right direction???  This op-ed totally ignores Obama's sub 2% GDP growth economy, negative job growth for his entire term as president, 8.2% official unemployment with actual unemployment at 15%, exploding debt, collapsed housing market, unavailable credit, over regulation and an anti-business administration from the top down,  but he'll get a boost because gas prices drop a few cents???
Jul 8, 2012 10:43AM
We should be happy about 3 dollar gas , are you kidding me the working class suffers the worst with these gas prices and our president does not give a damn about it, this is another hidden tax he has happily heaped upon us , and you have that in his own words .
Jul 6, 2012 10:01AM
Gasoline price dropping has NOTHING at all to do w/PREZZ/obiee/k'nobee or his worthlesssssss policies!!! ANY OLD FOOL SHUD be able to see that!!!
Jul 5, 2012 6:33PM

Typical liberal garbage.


Obama has increased our debt by printing money and borrowing from the Chinese.


Obama sucks, as do his supporters and the liberal media.

Jul 6, 2012 11:11AM

Get commodities OFF the exchange, and lets have some increased tariff's on items from countries whom we have such large deficits with. Jobs and recovery will follow. Why is balancing trade such a no fly zone with the poor shape of our economy?

Did it ever occur to you, that these trouble making middle eastern countries buy oil futures, threaten to block the straight of whatever, rake in a bunch of money and then stand down?



Jul 4, 2012 4:41PM
The only boost I want to give Obama is a boost down the road in Nov.
Jul 10, 2012 2:27PM
Great propoganda article on gas prices & the President. Prime example of how to dumb the masses. The President and any other world leader have very little influence, if any with the price volatility of gasoline. It's supply and demand, Opec & the free market set the price.
Jul 3, 2012 6:49PM
So many unemployed people there isnt much of a demand for gasoline. I dont read or hear anything about the Obama regimes ideas for jobs or reducing the debt.Sure hope he looses in November,we need change.
Jul 11, 2012 8:28AM
All one has to do is read most of these blogs to realize that education is not producing rational, thinking, patriotic citizens in this society.  The narrative in this nation is too polarized to function.  We need jobs, but too many can only talk about immigratiion, abortion, gun control, racism.  etc.  Religion, politics, business have been corrupted to the point that they are not functional enough to allow a healthy democracy to flourish.  We need to read the "Preamble" to our constitution daily and practice the plan laid out for us to survive and grow.  Too many of our citizens in positions of (Leadership) are failing us, and have made $$$ their God and wealth/power their religion. 
Jul 16, 2012 2:08PM

Are republicans stupid or just plain blind!!! When have you ever seen people who are born into wealth, became wealthy or trying desperately to get wealthy think about anything but their agenda to get more wealth and toss it back and forth in there wealthy circle!!! They don't give a flying crap about anything else or anybody else!!!! The fact that the wealthy's income and bonuses go up while our pay, groceries and anything else you can think of goes down!! Everything you buy at the store has strunken while the prices are constantly rising!! The wealthy squeeze blood from a turnip and through us the shell. Most of those wealthy republicans are just like slave masters "You take the bacon and pork chops and through the rest of us (republicans & democrats) the chitterlings (pigs intestines). I'm sick of these smucks talking about pulling yourself up by your own boot strep!! Everybody get help. Somebody passed along a contact number, a lead, a chance, an opportunity or something for anybody to get where they are!!!! The wealthy are the gangsters and you republican flunkies better watch out!!!  Your boss will wack you at the drop of a dime. They will cut you in little bitty pieces and bury you!!!

Jul 5, 2012 12:05AM
Gee Roon, gather some credible information about job creation that Obama wants to initiate. He wants to put tens of thousands to work rebuiling our broken infastructure. Republicans complain he would be breaking the bank. Not so. In additition to constructionn jobs, this woud add tax revenues and employ those who work in support of those job, like suppliers, clerks , waitresses and laborers. As to reduction of the deficit, his plan along with the plan of the last several Secretaries of Defense would be to terminate the F-35 airplane which would save hundreds of billions. No, he is not for taking the food out the mouths of seniors or children. No, he is not for seeing people go without shelter or the means to a livable wage. Best you talk to you compassionate Republican friends and dicuss what they want and what they oppose. My bet is you will find them self absorbed and greedy. 
Jul 8, 2012 1:26PM
Don't worry, Grand Oafish Party, the earth is six thousand years old, immigrants are bad, African-Americans and Hispanics are bad, colleges and universities and professors are bad, the do nothing GOP in Congress is good, AND low gas prices are bad.  Your beliefs are still good for our nation.
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