The Sticky Politics Of Cheap Oil

The collapse in oil prices and Texas’ pain could reshape the electoral map in November

- Amanda Kolson Hurley

Gasoline prices of less than $2 a gallon ought to be good news for a U.S. president with an eye on reelection: It’s a truism that American voters are hypersensitive to the price of gas and factor it into their decisions in the voting booth. But with the U.S. now the world’s top energy producer, rock-bottom oil prices are inflicting major economic damage and pose a problem for Donald Trump.

Falling prices caused by shutdowns related to Covid-19—and Saudi Arabia and Russia flooding the market in a price war—have led drillers to close down half of all U.S. oil rigs. The U.S. oil and gas industry lost 51,000 drilling and refining positions in March alone, according to BW Research Partnership, a consulting firm.

The industry’s woes will exacerbate the nation’s wider economic misery and stand to influence the outcome of the presidential race. In the runup to November, the twin shocks of Covid-19 and the oil price collapse are jeopardizing Trump’s standing in Republican Texas, the second-biggest prize on the electoral map. Yet the same energy dynamics dragging down the economy in Texas could give Trump a boost in Pennsylvania—a critical swing state he barely won in 2016—because decreased oil production potentially means higher prices and more jobs for the state’s fracking-fueled natural gas industry.

Texas, the epicenter of America’s oil and gas industry, has borne the brunt of the price crash. Because of the coronavirus crisis and the oil bust, the state “is suffering a double black-swan event,” says Mark Zandi, chief economist for Moody’s Analytics, using a term that describes rare occurrences with extreme detrimental impact.