Strategic oil reserves are at their lowest level since 1982: Why aren't gasoline prices falling?

While oil prices have reached the highest level in recent years following the joint attacks of the USA and Israel on Iran, the political price of rising fuel costs may fall on the Donald Trump administration and the Republican Party in the midterm elections on November 3. While the energy shock created by the conflicts in global markets caused the greatest economic damage in the USA, all eyes turned to the election ballot boxes.

RECORD INCREASE IN FUEL AND BRENT OIL PRICES

The barrel price of Brent oil, which was at $72.48 before the war, climbed to over $126 with the start of the conflict. Completing last week at $113.43, Brent oil increased by approximately 56.5 percent compared to the pre-war period.

This rise in global markets was directly reflected in fuel prices in the US domestic market. According to American Automobile Association (AAA) data; The average price of gasoline, which was $2.98 per gallon before the war, jumped to $4.17 as of November 1. Thus, gasoline prices in the USA have gained 40 percent since the beginning of the war.

THE BILL OF THE ENERGY CRISIS TO THE USA IS 160 BILLION DOLLARS

Center for Research on Energy and Clean Air (CREA) analysis revealed that the Strait of Hormuz-centered oil shock brought a total of $468 billion in additional fuel costs to consumers around the world. Approximately one-third of this huge bill, equivalent to $160 billion, was directly reflected in the US economy.

According to the latest Pew Research Center poll dated October 30, 74 percent of Americans are seriously concerned about increases in gasoline and energy prices. This rate was 43 percent in January and 60 percent in July. This growing economic anxiety in the public has brought the election pressure on the Trump administration, which set out with the promise of reducing prices, to its peak.

IS THE POLITICAL COST AT THE DOOR FOR THE REPUBLICAN PARTY?

Researcher Francesco Sassi from the University of Oslo stated that rising energy costs have destroyed the US's perception of "energy independence". Sassi evaluated, "Rising fuel prices are expected to inevitably make the Republican Party pay a political price in the midterm elections. The election results will show whether the costly failures of the war will be accepted by the administration."

'DIPLOMACY IS THE ONLY TOOL THAT WILL REDUCE PRICES'

Energy Intelligence Group oil markets economist Julien Mathonniere pointed out that the US's strategic oil reserves (SPR) are being consumed at a rapid pace. Emphasizing that the reserves dropped to their lowest level since 1982 with 283 million barrels, Mathonniere said:

"Retail fuel prices in the USA have become Iran's most effective pressure tool on Washington. The only tool that can eliminate the risk premium reflected in oil prices is diplomacy. Diplomatic offers that envisage the opening of the Strait of Hormuz are of much more vital importance than the use of strategic reserves."

In addition, it was stated that gasoline demand in the USA decreased by 4 percent in the summer months due to rising prices and that consumers began to change their consumption habits.

ICIS Senior Petrochemical Specialist Paolo Scafetta stated that fluctuations in oil markets will continue and that the normalization of oil flow through the Strait of Hormuz and the end of the Russia-Ukraine War are the main factors that can relieve the markets.