- The economic recovery is thriving, but surging gas prices are hurting President Biden's approval.
- Prices sit at their highest levels since September 2014 as demand continues to overpower supply.
- The oil market's volatility kept the recovery chaotic for Americans shouldering the growing costs.
The US economy is rebounding at extraordinary speed, but Americans aren't feeling great about it. To see one big reason why, look to any one of the country's 110,000-plus gas stations.
As consumer prices have jumped across several categories, few items have come to symbolize pandemic-era inflation more than gasoline.
A Thursday report showed gas prices have gained 40% over the past year, through January. Gas now costs an average $3.44 per gallon across the US, the Energy Information Administration said Monday. That's the highest since September 2014 and nearly $1 more than the pre-crisis average.
Spiking gas prices run counter to other measures that suggest the economy has fully healed. Gross domestic product is well above its pre-pandemic peak. The unemployment rate sits close to record lows. Consumer spending rebounded and then some.
Yet, overall, Americans are coughing up much more for basic necessities than they had to a year ago. The same report from Thursday showed prices for common goods and services soaring 7.5% in the year through January, surpassing expectations and accelerating from December's pace.
The situation has evolved to the point where it's now a hot-button political topic, and the next eight months will be critical for Democrats to make the case they're handling the economy well. If Thursday's data is any indication, they'll have to campaign for midterm elections while inflation holds at dizzying highs.
At present time, Americans' frustration with inflation seems to outweigh the otherwise booming economy. Consumer sentiment plummeted to its lowest level since October 2011 in early February, according to the University of Michigan.
The concern cited most by surveyed adults was inflation and its effect on real incomes, Richard Curtin, chief economist at the university's Surveys of Consumers, said. Despite the recovery's blockbuster pace, surging prices left people feeling worse than they did at the start of pandemic lockdowns.
It doesn't help that oil prices have been wildly volatile since the coronavirus crisis began. Prices tanked and even went temporarily negative in early 2020 as lockdown measures slammed demand for travel. Oil retook its pre-crisis highs in early 2021 as restrictions eased and travel picked back up, but the rally only intensified from there.
Disagreements between the Organization of the Petroleum Exporting Countries and the US added more fuel to the fire. The Biden administration called on the oil cartel to increase production in August, but the organization declined, saying demand hadn't recovered enough to justify such a move. The months since have seen prices surge higher still as Omicron fears and fresh tensions between Russia and Ukraine add to the commodity market's volatility.
Sky-high gas prices are trouble for Biden and the Democrats going into this year's elections
Where the broad recovery has been fairly stable since vaccines were rolled out in 2021, gas prices have been anything but. It's helped drag the president's approval rating below 40%. Stickers of the president proclaiming "I did that!" now dot gas pumps across the country.
But it's not just Biden's standing that's taking flak; his policy agenda is floundering, too.
The administration's ambitious social and climate spending plans stalled in late 2021 as Sen. Joe Manchin withheld his support, saying the Build Back Better plan shouldn't be approved until inflation falls back to earth. The West Virginia's backing is necessary for Biden's legislative ambitions in the face of likely unified Republican opposition in the evenly-split Senate, and Manchin reiterated his concerns following the January CPI report's release.
"As inflation and our $30 trillion in national debt continue a historic climb, only in Washington, DC do people seem to think that spending trillions more of taxpayers' money will cure our problems, let alone inflation," Manchin said in a Thursday statement.
With Manchin still opposed to new spending, it's unlikely Biden's landmark social spending plan is approved ahead of the 2022 midterm elections. But it's probably too late to save Democrats' election chances, anyway. Political parties tend to lose seats in Congress when they enter midterm elections with full control of the government. There's also little correlation between a strong economy and a party's midterm hopes, according to Insider calculations.
Even if inflation dies down and the economy is booming by November, Democrats face a tough battle to hold control of Congress. While gas prices show no signs of dropping, there might not be a better time for Biden to pass the rest of his spending plans.