Gasoline and diesel prices hit record highs... Inflation concerns spread

Following gasoline prices in the United States, diesel prices have soared to an all-time high, putting pressure on consumer prices and corporate costs.

There is an analysis that as high inflation intensifies about two months before the midterm elections, it could be a significant political burden for President Donald Trump and the Republican Party.

According to the American Automobile Association (AAA) on the 4th (local time), the average national gasoline price as of this day was $4.1474 per gallon. As of September, this is the highest level ever. This is well above the $3.80 per gallon price on July 4th, Independence Day, which was the peak holiday driving season.

The price of diesel was $5.85 per gallon on this day, exceeding the previous high set in June 2022.

In the United States, gasoline prices typically drop around Labor Day as demand for summer car travel decreases. However, this year, there is an unusual trend of prices rising despite seasonal demand decline.

This is attributed to geopolitical instability in the Middle East due to the US-Iran war, the loss of Russian oil refineries due to drone attacks in Ukraine, and a decrease in fuel inventories in the US.

U.S. oil refineries are also increasing production, but they do not have much room to spare.

According to Bloomberg News, the operation rate of oil refineries in the Midwestern United States has risen to 103%, exceeding nominal production capacity.

Rising oil prices not only increase fuel costs for drivers, but also lead to transportation costs and food prices, which can lead to inflation throughout the economy.

Although the U.S. economy maintained relatively robust consumption in the first half of the year despite high inflation, some analysts say that consumption may slow in the second half of the year when the tax refund effect disappears as energy costs take up a larger portion of the household budget.

This price increase is noteworthy in that it is increasing not only in areas where prices were previously high, such as California, but also in the Midwest and rural areas where prices were relatively low. In particular, rural drivers can be greatly affected by rising oil prices as they often travel longer distances and use vehicles with lower fuel efficiency than those in urban areas.

This could increase voter dissatisfaction in the Midwest and rural areas of the United States, which are the Republican Party's core support base, and place a burden on President Trump and the Republican Party.

CNN reported, “Gasoline prices have never been this high during the Labor Day holiday,” and added, “This is another blow to President Trump, who had pledged to supply cheap energy.”

President Trump recently met with executives from domestic oil refineries and fuel distribution companies at the White House and ordered a reduction in retail prices.

He also ordered the Justice Department to push for new deals so that U.S. companies can secure Venezuelan crude oil and to investigate whether energy companies are engaging in price gouging.

However, it is pointed out that it is not easy for such measures to lower gas station retail prices in a short period of time. This is because international oil prices, oil refinery operations, inventory, and transportation conditions are complexly intertwined among the factors that determine oil prices.

President Trump has stated that oil prices will fall quickly once the war with Iran ends.

Neil Mahoney, an economics professor at Stanford University who was in charge of fuel policy in the Biden administration, said, “It is a very worrying situation for incumbent politicians, especially Republicans, that gasoline prices remain at historically high levels at the end of the election season and show no clear signs of decline.”