Oil Market and Gas Price History by President

Oil & gas: Do past presidents provide precedent?
As arguably the planet’s most important commodity, the price of oil has downstream impacts for everything from interest rates to equity prices to currency exchange rates. As we approach November 3rd, traders are naturally wondering: How will the 2020 US Presidential Election impact oil and gas prices?

(1) Generally, a president's ability to impact prices is relatively limited.
Broadly speaking, the oil market is global in nature, and therefore, the policies of a single country’s leader (even a country as important for the global economy as the United States) have a limited impact on the planet’s aggregate supply and demand dynamics, despite occasional claims to the contrary.

To take a trite example, no one would accuse former President George W. Bush of being particularly hostile to the oil industry, yet gasoline prices nearly tripled under his watch from a low of $1.45/gallon in early 2001 to $4.05/gallon by June 2008. More commonly, broader economic forces (e.g. the Great Financial Crisis that hit shortly thereafter and drove gas prices back below $2.00/gallon or the COVID-19 Pandemic during President Trump’s first term) are the primary drivers for oil and gas prices.

(2) “Drilling Down” on Bush, Obama, and Trump

That said, in some instances domestic and international policies can nudge prices in one direction or another over a period of time, especially when it comes to refined petroleum products such as gasoline. As the chart below shows, the price of gasoline has fluctuated under the last three presidents, with no clear relationship based on party affiliation:

Source: Forbes, Robert Rapier

Looking at the above graph, some would argue that the drop under President Trump heading into 2019 was driven at least partially by President Trump’s aggressive deregulation of energy companies. Similarly, Trump’s international policies encouraging both Saudi Arabia and Iran to export oil over this timeframe may have played a role in temporarily increasing global supply.

Of course, the proverbial “elephant in the room” is the ongoing COVID-19 pandemic, which has decimated global demand for oil. Pending any vaccine breakthroughs, the path of the pandemic (and by extension, demand for gasoline and other petroleum products) will at least partially depend on the federal virus containment efforts. As the chart below shows, demand for gasoline in the United States has nearly recovered to its 2019 average of 10M barrels per day:

Source: Bloomberg, Bank of America

(3) Economists vs. everyday citizens: who's side are you on?

When it comes to a President’s perceived influence on oil and gas prices, professional economists and everyday American citizens disagree. For example, according to a recent study quoted by the New York Times, not a single one of 41 economists surveyed agreed with the following statement: "Changes in U.S. gasoline prices over the past 10 years have predominantly been due to market factors rather than U.S. federal economic or energy policies." These economists (correctly in our view) assert that the global supply and demand dynamics are far more important.

In contrast, many Americans believe that the President can control, or at least heavily influence, oil and gas prices. This belief is representative of a more general tendency to attribute too much credit when things go well and too much blame when things go poorly to the current President.

As we’ve noted before, the biggest risk for readers is to let politics become too big of a factor in their trading, rather than following a well-developed, objective strategy including proper risk management principles. For help developing your own effective trading strategy for the 2020 Presidential election and beyond, reach out to one of our client support representatives today!

* Please note oil products may not be available to trade in all regions.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.