High Gas Prices Dominate US Political Landscape, A 2008 Deja vu Of Sort For Biden!

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Gas prices

High gas prices are very important as a noteworthy but often forgotten episode from the 2008 presidential election reminds us. Are high gas prices fatal for Biden and the Democrats? What happened the last time high gas prices dominated US politics?

In Summary

• Gas prices have gone up 25% in the last two months.

• The Republicans’ midterm election assaults are likely to center on rising gas prices. But will they cause hurt to Democrats?

• The 2008 presidential campaigns were dominated by the price of gas, which may affect this year’s elections.

Gas prices
A hand of cash for high priced gas. [COURTESY]

While high gas prices are disruptive, is it fatal for Biden and the Democrats?

Steep gas prices, as general inflation, will very inevitably undermine President Biden’s approval and the Democratic Party’s political prospects. However, there is still discord over the magnitude of the price spike and whether there is a definite correlation between gas prices and election outcomes.

The cost of living is increasing across the country. According to the US Energy Information Administration, the average retail gallon of gasoline has risen by around 25% in the last two months and by almost 70% since President Biden took office. As Biden conceded this week, his proposal to ban US imports of Russian oil may certainly drive prices considerably higher. However, the future is uncertain – oil prices have declined slightly in recent days.)

The overall trend’s effects have only recently reverberated throughout the American political establishment. The prospective consequences for Biden are unclear: Putin is primarily to blame for the most recent shock, and Biden’s approval rating has risen slightly in recent weeks, to approximately 43%, according to FiveThirtyEight’s tracker, though that could be a transitory boost from his State of the Union address. Even so, if these high prices persist, they will undoubtedly be a focal point of Republican assaults during this year’s midterm elections.

Can those assaults succeed? In particular, the effect of gas prices is more difficult to discern than one might assume. The dilemma here is that gas price shocks typically precede recessions or are associated with other economic turmoil. This makes it difficult to ascertain whether voters are influenced by high gas prices or other economic considerations. According to some observers, it is more of the latter, and gas prices do not have a significant effect on elections on their own.

However, research conducted by Laurel Harbridge, Jon Krosnick, and Jeffrey Wooldridge discovered that rising gas prices appeared to be detrimental to presidential approval: Between 1976 and mid-2007, each ten-cent increase in gas price resulted in a 0.6 percentage point decline in approval rating. (Prices have risen by around $1.73 since Biden took office, corresponding to a roughly ten-point decline in approval.) That is approximately the drop he has experienced since his inauguration, though there are undoubtedly other factors at work.)

One self-evident thing is that politicians acknowledge high gas prices are critical. That is seen in a notable but mostly forgotten episode from the 2008 presidential election, when gas prices briefly reached record highs and appeared to have the potential to affect the election’s outcome, throwing the campaigns into a whirlwind of position-taking.

Although much has transpired in the fourteen years since 2008, there are still some valuable lessons to be drawn from the 2008 debacle.

Gas prices
Hundred dollar bills with the words 2008 meltdown. [COURTESY]

 

Gas price crisis in 2008

Around spring 2008, polls indicated the Democrats were a distant favorite option to win the White House. President George W. Bush’s approval ratings have plummeted, owing to the deteriorating economy and his protracted, brutal Iraq war. Barack Obama dominated Hillary Clinton’s protracted primary campaign, and polls against the GOP nominee anticipated John McCain, giving him an excellent chance to become the country’s first Black president.

And then, out of nowhere, the presidential campaigns got engulfed by the price of gas. Gas prices skyrocketed in the first few months of 2008; at their peak in June, they were 30% higher than in January. (Inflation-adjusted dollars, the national average price increased to $4.16 a gallon over that period.)

“When asked in an open-ended style to describe the economic or financial issue they’ve been hearing about the most in the news recently, nearly 72% of Americans cite gas and oil prices,” the Pew Research Center said in June 2008. “There is no other matter that compares. The housing and mortgage crisis comes in second place.” While major issues with subprime lenders became apparent in 2007, and investment bank Bear Stearns was bailed out in March 2008, the crisis’s defining moments had not yet crystallized.

Thus, policy proposals began to emerge. McCain and Clinton advocated a federal gas tax holiday; Obama dismissed the idea as posturing that would accomplish little, and economists confirmed.

Nonetheless, once the primary concluded in June and gas prices continued to rise, Obama determined that he needed to offer voters something and revealed his support for an oil company “windfall profits tax.” Economists scoffed at this as ineffective pandering.

Despite the widespread perception that adverse economic situations weaken the incumbent party, Republicans were surprisingly optimistic that the gas price problem could benefit them. The party quickly rallied around the argument that Americans required more oil — especially that the federal restriction on offshore oil drilling be lifted. “Drill, baby, drill,” as the eventual motto went. For Democrats, this was awkward. Many party members opposed the concept owing to the risk of environmental distress, while others pointed out that it would take years for new drilling to have even the slightest effect on prices. However, it fared exceptionally well in the polls, garnering 73% support.

Democrats wriggled, and as the summer unfolded, they realized that they would have to yield. Dick Durbin, the Senate Democratic minority leader, stated that he and Majority Leader Harry Reid were “open to drilling and responsible production.” And in August, after Obama’s advantage in polls shrunk several points, he indicated that he may favor offshore drilling as part of a bigger energy measure and that he would tap the country’s Strategic Petroleum Reserve to cut prices further. If gas prices decided the 2008 election, Obama would not lose by appearing inflexible.

Ultimately, all of this position-taking was rendered irrelevant by events. That September, the Great Recession’s financial crisis accelerated, resulting in plunging stock prices, falling demand, rising unemployment – and falling gas prices. By Election Day, gas prices had dropped so low that they were around 22% lower than they had been at the start of 2008. As a result, the apocalyptic gas price electoral showdown was averted.

Gas prices
GLASGOW, SCOTLAND – NOVEMBER 08 Former US President Barack Obama gestures as he speaks during a round table meeting at the University of Strathclyde on November 08, 2021 in Glasgow, Scotland.

2008 and 2022; Contrasts and similarities

With just about eight months to the November elections, there is plenty leg-room for gas prices to change — in either direction. However, there are some reassuring and unsettling implications for Joe Biden in the 2008 gas price wars.

Biden may take comfort in the sense that the incumbent party — the Republican Party — succeeded in putting Democrats on the defense over the issue. Maybe this indicates that he is not destined to be blamed by voters for rising gas prices and that with the right message, he can escape that eventuality.

However, it is unclear whether this will work out well for Democrats this year. For starters, it’s the midterm elections, which are nearly usually a risky election cycle for the incumbent president’s party. The issue of high gasoline prices may also benefit Republicans somewhat, as the GOP is more associated with unfettered fossil fuel production than with environmental issues. Thus, even though Bush was president at a period of record-high gas prices in 2008, the GOP could pursue an offshore drilling support campaign.

Biden may not have the same luxury – he cannot outsmart Republicans on drilling since they have already pressed him to increase domestic output far beyond Democrats’ tolerance threshold dramatically. Nonetheless, he may take heart from the fact that, even before the 2008 financial crisis displaced that year’s gas price issue with something more grave, Republican smears on Obama were unable to derail him in the polls completely.

While many global factors affecting the price of oil are beyond Biden’s control, he does have the advantage of using the presidency’s powers to alleviate some of the pain. For example, he already indicated in November that he would tap the Strategic Petroleum Reserve in an attempt to contain price rises, which he expanded on during his State of the Union speech.

However, by imposing a ban on Russian oil imports to the US, he also supports a strategy he concedes will raise prices. “Defending freedom will be costly,” Biden stated last week. Now he must convince voters that the cost is justified.

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