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Truck driver Don Pamateer fills his truck with diesel fuel at a Pilot Travel Center in Princeton, Illinois, March 5, 2012. Economist Philip Verleger Jr. expects the U.S. to be able to meet all of its own energy needs by 2023.Daniel Acker/Bloomberg

Now that the U.S. economy is showing signs of life after debt, President Barack Obama has decided it's safe to hold up his administration's less than stellar economic record as a selling point on the campaign trail. But one big dark cloud still hovers overhead: the steadily rising price of oil in general and gasoline in particular.

Oil prices are plainly headed in the wrong direction for an economy still in the early stages of recovery and reliant on energy imports. Benchmark Brent crude closed in on $125 (U.S.) a barrel Friday, a hike of more than 30 per cent so far this year.

But what really scares sitting politicians in an election year are sharp jumps at the pumps. U.S. retail gasoline prices rose again last week, to a national average of $3.83 a gallon, an increase of more than 55 cents so far this year. In half a dozen states, including politically important California and New York, the price is already north of $4. Canadians would be delighted to be paying the equivalent of only slightly more than $1 a litre. But Americans are fuming.

The good news for President Obama and his brain trust is that these price trends won't continue.

"What we've had is a tight [oil]market," says economist Philip Verleger Jr., who has devoted much of his long career to digging deep below the surface of oil and other commodity markets. "I think it is in the process of unwinding."

Mr. Verleger, who recently recommended that the U.S. government release oil from its strategic reserves to ratchet up pressure on Iran, dismisses that country's threats to disrupt Mideast shipments. He also notes that U.S. gasoline consumption has been falling at an accelerating clip – 5.5 per cent in January from a year earlier, 7 per cent in February and probably more than that in March.

The U.S. really behaves like three different countries when it comes to oil – the East Coast, West Coast and the vast middle, which he calls "Saudi America", stretching from the Appalachians in the east to Utah in the west. " 'Saudi America' is moving very quickly to energy independence," says Mr. Verleger, president of Colorado-based research firm PKVerleger LLC. Refiners in the midwest have more gasoline than they know what to do with. "By summertime, a wall of gasoline is going to be working down the Mississippi, pushing on refiners down there."

All of which will ease pressure at the pump.

But even bigger changes in the market lie just down the road. That's because the U.S. is in the midst of a remarkable transformation that will end its dependence on foreign imports, including Canadian oil, much faster than anyone realizes and give its manufacturers a huge comparative advantage over competitors from China and other high-cost energy markets.

Mr. Verleger has circled November, 2023, as the magic date, exactly 50 years after then president Richard Nixon called for the U.S. to meet all its own energy needs by 1980. Now, the shale gas explosion and increased production from offshore and unconventional oil sources in the U.S. heartland are turning the impossible dream into reality.

"It is a very good news story for the [U.S.]economy, leaving the [presidential]campaign aside," says Mr. Verleger, who retired last year as a professor of strategy at the University of Calgary. "And it's a good news story for Canada, if you respond quickly and realize the best thing that ever happened [to the industry]was Keystone getting delayed."

The U.S. Midwest is awash in crude and natural gas supplies, "so what are we going to do with the Canadian oil? The smartest thing the Canadians could do is take a look at the rapidly changing energy situation in the United States and realize that what you're doing is pumping oil into the middle of the United States and it's just going to sit here. We could have a situation of $1 a gallon gasoline in Houston and $5 a gallon in New York City. And there's no way for the stuff to get out [of the country] We don't have any export ports."

The solution for Canada: Expand the necessary pipeline and port capacity and steer the production to Asian markets. But in the meantime, "we'll keep seeing the Canadian exports coming into the U.S. market, because they have no place else to go. What's going to happen is that the price gap between U.S. and world prices is just going to get wider and wider and wider."

Getting back to the here and now, the world market has faced a series of disruptions in recent months, including lost output from Nigeria, the bankruptcy filing of Europe's biggest refiner, PetroPlus, and the surprising fallout from the European Union's decision to impose sanctions on Iranian oil.

The actual oil embargo doesn't take effect until July and is expected to have minimal impact on the global market – and even less, if the U.S. taps the surplus in its strategic reserves. But the sanctions have already taken a big chunk of the world's tanker fleet out of the market, because operators can no longer obtain the costly insurance they need from European underwriters to cover cargos of Iranian crude, even if they pick up the oil in Egypt, where it is shipped via pipeline.

Traders have been scrambling to locate other supplies since the curbs went into effect in January, while major Asian importers continue lobbying the EU for an exemption. It's far more serious than any Iranian military threat, Mr. Verleger says. "The sanctions on the insurance side are really a big deal."