A surge in gas prices could cost President Biden reelection in November, a recent analysis by Moody’s Analytics found.
Moody’s currently predicts that Biden will narrowly win the 2024 election based on several political and economic factors, including gas prices.
After surging to a record-high of more than $5 per gallon in summer 2022, average gas prices have since fallen to around $3 per gallon. However, Moody’s said it expects prices to rise again to about $3.50 per gallon by Election Day.
“Biden gets a small tailwind from the year-over-year decline in gasoline prices, but the expected late-2024 increase erodes much of the benefit,” Moody’s wrote. “Having said this, forecasting oil prices is especially difficult, and if prices move up much more than anticipated, the damage to Biden’s re-election bid will quickly mount.”
If prices surge close to $4 per gallon, former President Trump will win the election, according to Moody’s. Like many Americans, Moody’s is expecting that the 2024 election will be a rematch between Biden and Trump.
Other economic factors currently weigh in Biden’s favor, Moody’s found. Inflation has fallen significantly after peaking at a 40-year high in June 2022. Despite repeated interest rate hikes by the Federal Reserve, the economy has remained surprisingly resilient, with unemployment staying below 4 percent.
“To Biden’s benefit, after more than two years of high inflation, real wages are growing again and by Election Day will be well above pre-pandemic levels in most states,” Moody’s noted.
Mortgage rates, which tend to follow interest rates, are also falling after rising to a two-decade high of nearly 8 percent in October.
However, a significant rise in mortgage rates or a significant decline in real household incomes “consistent with a meaningful recession characterized by significant layoffs and surging unemployment” could also threaten a Biden win in November, Moody’s found.
The president could receive a boost if the Fed begins cutting interest rates this year as expected, Moody’s said. Most Fed officials said in December that they anticipate at least two rate cuts in 2024, with the largest share projecting three rate cuts.
At its most recent meeting this week, the central bank opted to hold interest rates steady at a range of 5.25 percent to 5.5 percent, and Fed Chair Jerome Powell cautioned against expectations of a rate cut at its next meeting in March.
“We want to see more good data. It’s not that we’re looking for better data,” Powell said, later adding that a cut in March is “probably not the most likely case.”