In nine of the last ten US-presidential elections, if the price of gasoline was higher at the end of the incumbent's term in office, than when it began, the incumbent lost the election. The only exception to this trend was in 2004, when the average price on Election Day was $2.03 per gallon compared to $1.54 four-years earlier. George W. Bush won reelection, but just barely, 51% to 49-percent. Since Obama took office, the average price per gallon had doubled to $3.70 and is 43-cents higher than a year ago. It's up 23-cents just in the month of February. Most analysts say gasoline prices could climb to $4 a gallon, as US-refiners switch to a more expensive blend of petrol for summer driving.
But regardless of the cause, the president of the United States gets an inordinate share of the blame anytime there is a spike in gasoline prices, dating back to the Carter administration. While the president is punished in the court of public opinion whenever gasoline becomes too expensive, he receives no reward when gasoline prices are relatively low. If a spike in gasoline prices is sustained for an extended period of time, it usually has a ripple effect of fueling broad based inflation, and begins to chip away at the president's popularity.
One major problem that's now cropping up for the Obama re-election campaign, is that the price of North Sea Brent crude oil, - the benchmark for 2/3's of the world's oil markets, - appears to be tightly pegged to the direction of the Dow Jones Industrials. As the Fed inflates the value of the stock market, with its ultra-easy QE money policy, - one of a dangerous side effects is sharply higher oil prices. If the Fed is aiming to inflate the value of the Dow to the 14,000-level in advance of the upcoming presidential election, as is widely expected by equity traders, it also runs the risk of goosing oil prices higher to $150 /barrel or more.
It looks like Obama has a pretty good chance of staying in the White House.... The GOP isn't out of the race yet, but it's up against some strong historical opposition." And while we would agree that all else equal Obama likely is a shoo-in, never before will there have been a full blown debt ceiling crisis in a repeat of August 2011 in the weeks and months leading into the election - that factor alone, in our humble opinion, could end up being the swing variable that pulls the otherwise ironclad victory away from Obama's clutch, and explains why the GOP caved so quickly on the payroll tax extension which will add $100 billion in debt, and force a debt ceiling breach ahead of November. That, of course, and runaway oil: should crude continue its relentless surge, which it will if QE3 occurs, or an invasion or Iran becomes reality, Obama can kiss another 4 years goodbye.