Economists say a potential spike in gas prices could hand Trump the White House
- Moody's Analytics currently predicts that Biden will narrowly win reelection in November.
- One of the key points for their model is an expectation that gas prices will remain largely stable.
Moody's Analytics currently has President Joe Biden as a slight favorite to win reelection this November, but the prominent economic research firm says just a slight difference in volatile gas prices could doom his chances.
"President Biden's expected re-election rests in part on gasoline prices remaining in the $3 per gallon range," Moody's economists Mark Zandi, Brendan Lacerda, and Justin Begley wrote in their report. "All else equal, if gas prices surge back close to $4 per gallon, [former President Donald] Trump will win."
The trio of economists gasoline prices to tick up slightly from the current national average, which is around $3.15, according to GasBuddy. Moody's says that Americans could pay closer to $3.50 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," the economists wrote. "Having said this, forecasting oil prices is especially difficult, and if prices move up much more than anticipated, the damage to Biden's reelection bid will quickly mount."
Biden's presidency has endured major shocks in the oil market, which have sent gas prices as high as $5 a gallon in the summer of 2022. Russia's large-scale invasion of Ukraine and production cuts by OPEC countries wreaked havoc on the market.
Still, the economists caution that predicting the oil market is "especially difficult." Weather, in particular, hurricanes can cause prices to spike. Their prediction is slightly higher than GasBuddy's. The popular gas-pricing app said in its 2024 outlook that gas prices could average $3.15 in November with a potential range of $2.99-$3.31.
As for Moody's Analytics' overall projection, their model, which accounts for both economic and political factors, currently has Biden winning 308 electoral votes in a nearly identical repeat of 2020. Their prediction does call for Trump to win Arizona and for Biden to flip North Carolina, both states the other candidate narrowly carried last time around.
It is worth noting that Trump is not yet the presumptive GOP nominee given that so few delegates have been awarded. Nonetheless, top GOP officials are increasingly saying that former UN Ambassador Nikki Haley has little chance of surpassing Trump.
Political election forecasters, such as Nate Silver, have long been dismissive of pure economic models that rely on only one or two macro variables to predict the presidency.
Moody's model is much broader than that, but as the agency points out it failed to accurately predict the 2020 election, which to be fair did feature unprecedented elements such as the COVID-19 pandemic.