Top Biden administration officials say they are monitoring the situation in the Red Sea for its impact on American households as attacks on ships crossing the critical shipping lane threaten to raise prices for consumers in a presidential election year.
“I worry about the geopolitical space we live in,” Shalanda Young, director of the Office of Management and Budget, said Friday at a breakfast in Washington hosted by the Christian Science Monitor. “The Red Sea attacks, shipping, all of these things in the geopolitical space certainly have the chance and opportunity to raise prices on the American consumer.”
Young is the latest US official to highlight worries about the ripple effects of a wave of missile and drone strikes on ships in the Red Sea. President Joe Biden’s allies are acutely concerned about what that could mean for the White Houses efforts to curb inflation — a political liability for Biden ahead of November’s election.
Persistent inflation has played a major role in voters’ poor perceptions of his handling of the economy. The administration is particularly sensitive to the impact of high prices on consumers as the president touts his Bidenomics agenda, which the White House says helped bring down crippling inflation post-pandemic, much of it due to smoothing supply chain crunches.
The Red Sea attacks are being carried out by Iran-backed Houthi militants from Yemen. The militants say they are targeting ships that have links to Israel to protest that country’s military campaign in the Hamas-controlled Gaza Strip, but the attacks have impacted ships with no direct connection to the conflict.
“Some shippers are diverting. That adds days to delivery times, and it also adds to delivery costs,” National Economic Council Director Lael Brainard said in an interview on CNBC Friday. As of now, “we’ve seen very little effect, actually, on prices at the pump,” she said.
Energy prices remain in the spotlight given the Red Sea’s positioning in the oil-rich Middle East. Jared Bernstein, chair of the Council of Economic Advisers, also told reporters on a call Friday that so far the conflict has had “quite a limited impact on energy prices.”
The war between Israel and Hamas, which is designated a terrorist organization by the US, appears to have had little impact on the prices Americans pay for gasoline. Since the attack by Hamas on Oct. 7, the US daily national average of a gallon of regular gasoline has dropped to $3.09 from $3.71, according to data from the American Automobile Association.
Still, officials have been sensitive to the impact that a lingering conflict in the Red Sea — with some major shippers re-routing to longer and more perilous journeys — could have on prices in the US. A US-led force is conducting naval patrols in the Red Sea and has thwarted some attacks.
“If we weren’t concerned, we wouldn’t have stood up an operation in the Red Sea, now consisting of more than 20 nations, to try to protect that commerce,” National Security Council spokesperson John Kirby said in a White House briefing Wednesday. “It is a key international waterway, and it can have an effect on the global economy.”