The price of crude oil is up 36 percent since President Trump took office, squeezing the consumer at the pump and offsetting most of the personal net income gains from the tax cuts.
The rise in gas prices has cannibalized the tax cuts for most households, and one reason why the strong economy is not resonating with voters.
Blaming OPEC & The Global Sheriff Protecting Gulf Oil
President Trump used his speech at the UN General Assembly today to tear into OPEC,
OPEC nations, as usual, are ripping off the rest of world. – President Trump
The president also complained the U.S. is effectively the acting global sheriff protecting Mideast oil and receiving nothing in return. We agree.
The U.S. imports only a small fraction of its oil from the Persian Gulf, yet American taxpayers (financed by China’s PBOC and Japan’s BoJ) spend billions of the dollars per year to keep the Straits of Hormuz open. The U.S. Navy should send the bill to Europe.
Ironically, the rise in oil prices is a major factor contributing to the strong economy and the creation of many of the new jobs in the mining and manufacturing sector.
Oil Prices And Midterm Elections Since 1962
Nevertheless, President Trump understands rising oil prices are politically toxic. Though we think the tightness in the crude market is mainly due to traders front running the administration’s Iran policy, President Trump is clearly trying to deflect the blame to the OPEC nations.
U.S. sanctions on Iran’s energy industry, when they come into effect in November, could potentially drive oil prices above $100 per barrel, according to an industry expert. – CNBC
Low Correlation Of Oil Prices And Midterm Results
The following data table and plot illustrate the relationship between the change in oil prices in the 21 months after the inaugural and running up to the midterm election and the number House seats gained or lost by the administration in power.
Note in only two midterms since 1962 did the administration gain House seats: 1) 1998, due to the backlash toward and overreach by Republicans during the Clinton impeachment, 2) 2002, the political aftermath of the 9/11 attacks.
The data also show there is not a strong correlation between midterm election results and the oil price, though the relationship is clearly negative, illustrated by the red trendline, mainly the result of outliers.
Using the regression results, given the 30 percent plus rise in oil prices since January 2017 the Republicans are projected to lose 26 House seats, enough to change leadership to the Democrats. As an econometrician, it is difficult to take the results too seriously and are used only for illustrious purposes.
This midterm election, as are all, will be much more than just about the oil price. The model does explain, however, President Trump’s concern about the rising oil price.
Global Macro Monitor 
Very few consumers in the US are buying barrels of crude oil… arguably zero consumers. Why don’t you analyze the real world situation instead?
Why not discuss the onerous federal, state and local taxes that make up such a huge percentage of the gasoline prices?
Why not discuss the neglected infrastructure (highways) used to deliver retail gasoline to gas stations? Why not discuss the costs added when courts second guess permits for pipeline and refinery construction?
Why haven’t you mentioned the horrid burden imposed by Greenpeace and Sierra Club? They are entitled to their political opinions, but who gave these arrogant special interest groups the right to levy taxes on US consumers? Should the US military start bombing the real enemy of US consumers: Sierra Club and greenpeace?
I know the media likes to blame Iran or Russia or OPEC or a whole laundry list of boogey men. Lets blame the people who are actually driving up energy costs, the ones much closer to home
The corrupt socialists from the “Paris Accord” flew in on private jets, then commuted SEPARATELY in heavily armored stretch limousines, each of which was escorted by heavily armored SUVs filled with weapons and body guards. They stayed at a fossil fuel heated hotel, with 5 star food cooked on fossil fuel powered stoves… and they smugly blamed everyone else for relying on fossil fuel.
Today, France’s Monsieur Macron promised to preserve the EU, a body of unelected bureaucrats, against the masses that didn’t vote for it. He also promised France would not trade with countries that didn’t abide by the Paris accord mockery… If true, this means France must stop trading with Germany, which just announced they will join many other countries ignoring the Paris mockery. So is this French hypocrite going to preserve the EU out of spite at his own countrymen? Or is he going to halt all trade with fellow EU anchor Germany?
As just one small example: the $700 catalytic converter on every car in the USA was imposed by domestic special interest groups, not by OPEC or Russia or Iran or Saudi Arabia.
Bob,
I grew up in L.A. and went o bed every night with burning lungs. Now I travel can breathe easier and can see the mountains. Thank goodness for CCs.
Thanks for your comments.
Macromon – with his burning lungs…
L.A. is a city in a valley, surrounded by mountains – there is little cross wind to clear the smog created by L.A.’s 8 lane highways. L.A. smog continues to be a problem each summer, regardless of catalytic converters.
While Californians talk a big game about environmentalism… Boston, NYC and Chicago all have superior mass transit systems, compared to L.A. Boston, NYC and Chicago are not surrounded by mountains and do not have the stagnant air that L.A. has.
Boston, NYC and Chicago also get a lot of snow. The difference is these cities do not force Californians to buy snow tires. Californians are selfish and arrogant.
If your lungs were burning, why didn’t you move somewhere with a breeze? Why not impose CC requirements on your own cars, instead of arrogantly thinking everyone else lives in a toilet bowl geography like L.A.?
Why is YOUR problem somehow everyone else’s problem to pay for? Why aren’t Californians required to subsidize snow tires for Boston, NYC and Chicago?
Special interest extremists like Greenpeace and Sierra Club favor red tape and endless bureaucracy, which is not the same thing as favoring the environment. Both special interest groups should be forced to pay for the costs they burden society with.
PS – L.A. should shut down its eight lane highways before whining to the rest of the country about how you can’t breath. Your smog is your own doing