On Wednesday, new reporting revealed that Republican midterm efforts have been “thwarted” by a mounting crisis caused by President Donald Trump’s war with Iran. According to insiders who spoke with Politico, the administration has “no good options” for countering the mounting inflation caused by the war and Trump’s other policies, and the GOP is poised to pay a heavy price at the polling booth.
“Trump’s war in the Middle East for months has thwarted GOP plans to run on pocketbook issues this fall,” writes Politico. “Now, with the midterm elections mere weeks away, it’s likely too late to stem the political fallout from the sustained grind of expensive energy bills that threaten to spread to other consumer prices.” Six months into the war, with crude oil prices passing $100 a barrel as of Wednesday and diesel prices breaking national records, “the pain from energy costs has become a persistent drain on voters’ wallets and could soon lead to an increase in their borrowing costs,” while the White House has “no clear way” to fix the problem.
All the while, “higher energy prices and tariffs are hitting GOP candidates in Michigan, Maine and Iowa particularly hard, said Republican campaign strategist Alfredo Rodriguez. Voters tend to have short-term memories, but gas station signs offer plenty of reminders, he said.” According to Rodriguez, “The increasing price of diesel is going to have an effect on how voters pull the levers in those races. We have 56 days left until Election Day. The cake is already baked.”
The situation is about to get worse, writes Politico, as “inflation might push the Federal Reserve next week to do exactly what Trump doesn’t want them to do: hike interest rates.” And “even if prices cool, the damage to consumers is mounting. Unless diesel and oil prices make a dramatic retreat, higher costs for everything that freight trucks carry, farm tractors harvest and heating oil warms will hit consumers and put a drag on the economy.”
“They have no good options,” a former administration official, granted anonymity to speak candidly, said of the president’s aides. “And, if anything, inflation may get worse because you’ll get some bleed-through from diesel, which impacts everything.”
According to Politico, “Rising diesel prices are particularly insidious for the economy because there’s no quick solution. ExxonMobil and other oil producers may drill more wells when oil prices are high, but no company has a spare fuel refinery at hand to replace those in Russia that Ukraine has destroyed as part of the war there or that are trapped on the wrong side of Hormuz.” Farming voters are feeling the pain. Sen. Roger Marshall (R-KS), who is facing a surprisingly tight race for reelection, acknowledged that higher fuel prices are “a real concern” for his constituents. Now costing $5.51 a gallon, the average price of diesel in the state is $2 more than it was at the same time last year. “It’s not a political concern as much as just a real concern,” Marshall said. “Look, my neighbors, the people I go to church with, the babies I deliver, their families, farm and ranch ... diesel is one of the major input costs that I’m talking about, so it is a real thing.” Stephen Moore, an informal economic adviser to the administration, said prices are definitely a political problem: “High gas prices and oil prices have a reverberation effect.”
“People are worried that [oil and diesel prices] will seep into the supply chain,” said Dan Pickering, chief investment officer at energy investment firm Pickering Energy Partners. “Oil doesn’t care about interest rates, but interest rates care about oil.” And because high inflation is coupled with decently high jobs numbers, the Fed is forecasted to raise rates soon.
According to Abby Yoder, U.S. equity strategist at JPMorgan’s private bank, the situation is directly attributable to Trump’s war. “We wouldn’t even be talking about inflation and a Fed hike if it weren’t for this conflict,” Yoder said. “The longer this goes on, particularly in diesel prices, which are 15 to 30 percent of grocery costs, that could really start to bite going forward.”
“The pain could get worse in the Senate battleground of Maine, where Republican Sen. Susan Collins is in a tough reelection bid,” writes Politico. “Canada’s largest refinery — one that exports much of its fuel to the U.S. Northeast — will be shut down for maintenance this fall, taking supply out of the market just when voters get ready to head to the polls.” What’s more, “Perhaps the only option the administration has to bring prices lower — short of ending the war with Iran — would be to ban the export of oil and fuel, something Energy Secretary Chris Wright and others have vowed never to do.”
In the meantime, the price of oil continues to climb as oil traders grow skeptical of Trump’s attempts to manipulate the market. Said Pickering, “A higher [oil] price is becoming more permanent. Peace isn’t happening.”
