* Gasoline over $4 a gallon worries White House
* Oil at $125 a barrel could slow U.S. recovery
* Obama campaign fears voter backlash over gas prices
By Tim Reid and Alister Bull
WASHINGTON (Reuters) - White House officials are
increasingly worried that rising gasoline prices, and
disruptions to the global oil supply, threaten not only the
fragile U.S. economic recovery but the re-election prospects of
President Barack Obama.
White House aides are particularly concerned that if gas
prices surpass a national average of $4 a gallon -- and if oil
passes $125 a barrel -- the economic and political fallout
could dominate next year's presidential campaign and drown out
Obama's message of economic recovery.
Publicly, the White House insists the U.S. economy can
absorb a significant increase in oil prices. But privately some
of Obama's aides concede the potential for voter backlash if
prices continue to rise is a real political danger as Obama
seeks a second term.
One senior White House official admitted to obsessively
monitoring news that could affect the price of oil and said oil
prices were tracked inside the West Wing daily. Another said
oil prices, and the corresponding increase at the pump, has
been preoccupying them for months.
With volatility in the Middle East already pushing the
price of gas to a national average of $3.66 a gallon,
and U.S. oil to nearly $109 a barrel, a senior administration
official said $4 at the pump would be "a very significant
The official, echoing views of many economists, noted that
for every $10 increase in the price of oil, GDP growth is cut
by about 0.1 percent. If oil passes $125 a barrel the economic
recovery would begin to look imperiled, the official said.
"If you get toward $120, $125 a barrel, it certainly starts
to zing the economy, which will lead to a slowdown and
potentially a double-dip recession" said Charles Ebinger,
director of the Energy Security Initiative at the Brookings
Institution in Washington.
"Anything over that would be very dangerous, and you could
see a serious economic situation globally," he said.
Ebinger expects gas prices to rise another 40 or 50 cents
on average by summer.
"Then it will be a political issue," he said. "There's not
a lot the president can do - there's no short-term solution."
Tad Devine, a Democratic strategist and senior adviser to
Al Gore and John Kerry's presidential campaigns, said during
Gore's unsuccessful 2000 White House bid there was a spike in
gas prices during that spring and summer.
"As political issues go, this is a real one. There is
tremendous awareness, and a huge public sensitivity to gas
prices, especially amid a terrible downturn," said Devine,
whose polling during the 2000 campaign found gas prices a top
"If I were in this administration that issue would be of
real concern," he said.
Devine added: "Voters see prices going up and the blame
winds up at the president's door. I saw that with Gore -- it
really stops people focusing on other issues. There are a lot
of psychological tipping points. If we get to $4.50, or $5 in
the Midwest, it's going to be a huge problem."
Dan Weiss, senior fellow and director of Climate Strategy
at the Center for American Progress in Washington, said Obama's
political strategists are worried now.
"High oil prices are very bad for incumbent political
parties," he said.
One option Obama has to reduce oil prices is to tap the
U.S. strategic oil reserves, a step last taken by President
George W. Bush after Hurricane Katrina in 2005. The White House
says it has not yet decided at what point it would take such
"The price of oil is one of a number of factors that is
looked at ... in making that determination, but not the sole
factor," White House spokesman Jay Carney said in March.
Publicly, the White House is playing down the risks of oil
prices to the economic recovery, noting the rise did not hurt
job creation last month, while private economists continue to
forecast solid growth this year and next.
Austan Goolsbee, Obama's top economist, also argued energy
has less effect on U.S. economic growth than in the past, when
1970s oil shocks wrought economic havoc.
"(From) 1979 to today, our energy usage per dollar of GDP
is 40-plus percent lower than it was at that time. So up or
down, fuel prices just have smaller impact on the aggregate
economy," Goolsbee, chairman of the White House Council of
Economic Advisers, told Reuters.
Other White House officials framed the problem as more of a
political challenge to let Americans know that Obama "gets it"
and that he understands gasoline is hurting at these price
"For Americans that are already struggling to get by, a
hike in gas prices really makes their lives that much harder,"
Obama said last week. "It hurts."
(Editing by Eric Walsh)
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