This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Obama Has a Big Problem: Gas Prices

NEW YORK (TheStreet) -- The biggest hurdle to President Obama's re-election is almost surely going to be the inevitable steady rise in gas prices over the summer.

And no matter how hard he -- or anybody else -- argues that higher pump prices are largely beyond his control, you and I both know that the American public won't much care for explanations. They'll just be looking for relief.

And $5 gas looks very likely. I have traded oil for 25 years, and the pattern we're seeing now looks eerily similar to the run-ups in crude prices that preceded the first Gulf War in 1990, the Iraqi invasion in 2003 and the Libyan excursion last year.

All of these big spikes in prices were based upon supply threats that ultimately occurred because of military action, and the time line that is playing out with Iran shows many of the same characteristics.





That doesn't mean I am predicting war, but it does mean that the oil market is preparing itself for a sudden deficit of at least a substantial proportion of the 3.5 million barrels a day of Iranian supply that feeds into the global chain.

There is a hard deadline for this to happen as well: July 1. That's when the EU has decided to begin its boycott of Iranian oil imports. Also, the U.S. has done a lot of work to gain at least some support for its cause from the biggest importers of Iranian oil: China, India and Japan.

So far, the president so far has been able to calm the Israelis, who have threatened to preemptively strike at Iranian nuclear targets. The administration has pleaded with them to wait for the boycott and economic sanctions to tighten the noose enough to get Tehran to comply with atomic agreements it has already signed.

In Iran, the leadership continues to act defiantly, threatening to close shipping lanes for oil and make preemptive strikes of its own, and declaring that nothing will deter its nuclear plans.

All of this leads to inevitably higher gas prices going through the hard deadline of July 1 unless lightning strikes and the Obama administration can solve this problem before then through diplomacy.

I wouldn't count on it: The last negotiation between Iran and the U.N. atomic agency, the International Atomic Energy Agency, lasted all of 18 hours last week before negotiators came to a roadblock and reboarded planes out of Tehran.

If you're a Republican candidate for President, this is an instant opportunity. The skyrocketing cost of gasoline is one of the few issues that will resonate with everyone.

Newt Gingrich recently promised there would be $2.50 gas if he was elected but neglected to explain how he would bring that about. This is a big step up from Michele Bachmann's promise of $2 gas and Donald Trump's claim of being ready to "tell the Saudis" what the U.S. is "going to pay."

All of these statements may sound ridiculous in the light of real facts about global oil markets, but a public suffering under gas costing $4-plus a gallon is going to listen very closely anyway.

So the president has a big political problem, one he surely wishes weren't coming to a head in an election year. So far, he has dealt with it by blaming supply threats and speculators. This is perfectly true and legitimate but likely to fall on deaf ears.

He does have some interesting tools he can use more effectively to combat high gas prices, but I'll wait to lay those out in my next column. I'll have lots of time to talk about them as I believe President Obama's political problems from high gas prices have only just begun.

-- Written by Daniel Dicker in New York.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs