Oil price futures dipped more than 2 percent Wednesday on news that supplies of crude were higher than expected last week and expectations that the United States, Britain and France may release oil from government reserves to drive the price down. Prices for crude have risen from $75 a barrel in October to $105.14 today. Government intervention last summer did take prices down.
If today's trend continues long enough, it could have an impact on U.S. gasoline prices — now at a nationwide average for regular of $3.91 a gallon, up 22 cents in the past month, and 62 cents since Jan. 2. A drop in those prices could remove a cudgel Republicans have been using to pound on President Obama, claiming that it is his anti-oil policies that are driving gasoline prices upward. Polls have indicated that the price of gasoline could have an impact on the election.
Never mind that on Obama's watch, U.S. oil production has reached an eight-year peak, a reversal of a trend going back more than 40 years, and millions of acres of land on-shore and in the ocean have been opened up to oil and gas exploration. With the number of drilling rigs at a 25-year peak, the GOP chirp of drillbabydrill seems just a tad redundant.
Two elements driving speculation on futures down were a higher than expected increase in supplies announced Wednesday and the spreading view among analysts and traders than President Obama and the British and French are serious about throwing some of their oil reserves on the market. French Industry Minister Eric Besson said "the United States asked, and France welcomed this hypothesis."
A report from the U.S. Energy Information Administration said U.S. oil stockpiles rose by 7.1 million barrels last week to a seven-month high. Expectations were for only a 2.2-million-barrel increase.
Light, sweet crude oil for May delivery traded down $2.19 $1.82 Wednesday on the New York Mercantile Exchange. It had been briefly below $105 a barrel. Brent crude oil on the ICE futures exchange traded $1.71 lower at $123.83 a barrel.
If analysts are right who believe the market is on the verge of a significant downward move, say to $100 or less a barrel for U.S. crude, that should also eventually make a difference in gasoline prices. While it makes the headlines, the coming election isn't the only issue when it comes to oil prices. High prices could stall out what is still an unsteady economic recovery. Whatever the case, as Obama has said, Republicans cheer when prices at the pump go up because they can take that to score points on the campaign trail. Good news on prices is not good news to them.