Oil continues to influence like no other finite natural resource. In the 2024 US presidential election, the strategic commodity will be an important domestic issue.
Author
Emilie Rutledge
Senior Lecturer in Economics, The Open University
As the biggest producer and consumer of oil , the US has a particularly strong relationship with the black stuff. And the candidates know it.
Donald Trump has promised to and the financial backing of industry giants. Those giants have responded by (£5.7 million) to Trump’s campaign – three times more than for his 2020 run.
Meanwhile, Joe Biden has attempted to reduce dependence on fossil fuels with his and other . Yet at the same time he has overseen an increase in domestic oil production and promised motorists he will .
It’s an important promise in the US, a country whose love affair with . Out-of-town shopping malls, long highways and a lack of government investment in public transportation have fuelled car dependency, with many cities being designed around .
So it is perhaps unsurprising that pump prices are a . has even shown that gasoline prices have an “outsized effect” on inflation expectations and consumer sentiment. As fuel prices go up, confidence in the economy goes down.
And while many European and Asian countries have shifted towards alternative energy sources, the US has not reduced its when it comes to transport. Electric models make up of vehicles sold in the US, compared to 21% in Europe and 29% in China.
Any rise in gasoline prices ahead of the US summer “driving season” – when holidays and better weather encourage more road travel and gasoline consumption is estimated to be 400,000 barrels than other times – would be a serious concern for the Democratic party.
Yet it’s also true that whoever is in the White House actually has limited ability to influence gasoline prices. Around is the cost of crude oil, the price of which is set by international markets.
And despite producing enough oil domestically to cover its consumption, the US continues to trade its oil around the world. Back in 2015, Congress voted to lift restrictions on that had been in place for four decades, allowing US companies to sell their oil to the highest international bidder.
To complicate things further, some US refineries with a certain type of crude oil, which has to be imported. Neither international events or foreign production decisions are under the control of a US president.
Indeed, oil price spikes caused by political crises in other oil producing regions illustrate how continued dependence on oil itself, whether domestically produced or imported, leaves the US exposed to global market shocks which could in turn .
After Russia’s full scale invasion of Ukraine in 2022 and production cuts from countries such as , the Republican party used a rise in gasoline prices to which had reduced domestic oil drilling and ended drilling leases in the Arctic.
Big oil, little oil
So while the US president has little say over the price of fuel that voters pay, have a role to play, as oil producers make up a significant body of influence in the US.
Aside from the big firms backing Trump, the structure of the US oil industry among oil producing states in that it is dominated by a very large number of small independent producers who earn money from the extraction and sale of oil from their land.
In most oil-producing countries, subsurface oil is owned by the state. But in the US, the mineral rights are owned by the private landowner who can earn royalties by allowing oil companies to drill on their land. In 2019, there were in the US. Operating alongside them are some which produce around 83% of the country’s oil and account for .
Those companies drilling on state-owned land pay a royalty rate to the government, which up until recently was as low as 12.5% of the subsequent sales revenue. Biden’s decision to raise the rate did not go down well with oil producers.
Despite that raise and Biden’s pledge to forge ahead with the , the domestic oil and gas industry expansion has . In 2023, US oil production grew to unprecedented levels, averaging and forecasters predict a 2% production .
Surging US oil production may help with the Democrats’ re-election bid, but rising gasoline prices will not – even though their levels depend on much more than Biden’s energy policies. Instead, it may be that the international economics of oil markets drive voters’ decisions – and determine who wins and who loses in November 2024.
Emilie Rutledge does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
