Recessions can cause gasoline and oil prices to drop dramatically, as people facing job losses and money worries will drive less, reducing demand for gas and oil.
In 2008, the average price of gasoline fell 60% from a then-record price of $4.11 per gallon in July to the end of that year, as crashing financial markets triggered the Great Recession and massive job losses.
Recession risks are not limited to the United States
But it’s not just the threat of a recession in the United States that is driving down oil and gas prices. The US economy, with a strong labor market, is more robust than many other major oil consumers.
Since oil futures are denominated in dollars, this has helped limit the upside paid by US consumers, since their dollars go further. But it drives up oil and gasoline prices around the world even more, because more of those currencies are needed to buy oil and gasoline in dollars.
“That means recession fears are all the greater in other countries,” Lipow said. And the more economies in the world that fall into recession, the more that could reduce global demand.
But even if U.S. consumers benefit from gas prices down more than 20% from their peak, it’s not a particularly good idea for Biden to take too much credit for the drop, said Tom Kloza, global head of energy analysis for OPIS, which tracks prices for AAA.
The event was widely mocked as the war continued to escalate for years afterward. Kloza said if Biden places too much emphasis on lower oil prices, it could hurt him if prices start to rise again.
“There’s still a chance that in October or November, if these economies falter and don’t fall into recession, we could see a crude price of $120 a barrel again,” he said. Current prices are now down nearly $100 a barrel.
Biden’s limited impact on oil production
But while oil and gas prices have fallen over the past 10 weeks with little help from Biden, they have risen over the previous four months for reasons well beyond Biden’s control.
The main factor was the invasion of Ukraine by Russia and the sanctions imposed on Russia by Western countries supporting Ukraine. Although the United States did not import much oil from Russia, markets reacted to the impact that the loss of much of Russian exports had on global supply.
Prices were already rising higher even without the invasion.
Had Biden not taken these steps, any additional oil that might have been produced would not have been available yet.
“Keystone or fracking limits could have impacted prices in 24, 25 or 26. But until then, those are just Republican talking points,” Kloza said.