President Biden’s efforts to blunt rising prices at the pump are proving no match for the market forces that have again sent the cost of gas surging.
The sticker shock comes as Biden on Tuesday is expected to outline his latest plan to reduce the price pressures throughout the economy that have badly damaging his popularity. Biden will try to shift blame for the nation’s economic challenges to Republicans, pointing to Sen. Rick Scott’s (R-Fla.) plan, released earlier this year, for a minimum federal income tax. About half of Americans do not currently pay federal income taxes because they do not earn enough.
The remarks precede what is likely to be more tough news for the White House, when the federal government reveals its newest inflation data midweek.
No place is the pain more obvious than at the gas station.
“The tools the federal government can use to influence prices are limited,” said Devin Gladden, manager of federal affairs at AAA National. “They are already using almost the whole toolbox.”
This month’s uptick, Gladden said, is largely a response to the European Union’s announcement that, with a few exceptions, it aims to stop all imports of Russian oil by the end of the year in response to the invasion of Ukraine. The move has a much bigger impact on world markets than any short term measures the administration can take to blunt its impact.
Analysts warn it could be a long time before prices come back down significantly. At the very least, it is likely to be a long, challenging summer for drivers.
“No one has any idea how long this war will last or how long and deep its global energy impact will be,” said Edward Chow, a an energy security scholar at the Center for Strategic and International Studies who previously worked in the oil industry for decades. He said the reshuffling of the global oil export map could leave America facing the kind of prolonged, soaring prices it did during the OPEC embargo of the early 1970s and the Iranian revolution that followed later that decade.
“It may well be bigger and longer lasting,” he said. “You simply cannot take the country that was the world’s largest combined exporter of oil and gas off the board without major impact.”
Compounding the challenge for the United States is a pandemic during which demand dropped so low early on that at one point oil was trading for zero dollars a barrel. That, combined with market uncertainty as the United States and Europe race to transition from fossil fuels, gave oil companies little incentive to invest in costly new drilling infrastructure. Those kinds of things don’t ramp back up in days or weeks.
It is not just a matter of getting more crude oil flowing. The ability of the United States to refine it has diminished as older, dirtier, less efficient facilities have been replaced with updated refining equipment, said Kevin Book, managing director at ClearView Energy partners, a research firm. The nation’s refining capacity, he said, is considerably less than it was at its peak.
“It takes years to build new refineries, and years to expand existing ones,” Book said. “We will see more capacity in the world. Just not right here, right now.”
The other remedies that might help marginally right now are not all that politically palatable. One of them, said Patrick De Haan, head of petroleum analysis at Gas Buddy, is relaxing the environmental rules around gasoline in the summer months in major metropolitan areas. Suspending requirements that cleaner blends are used in these places, he said, could ease prices 20 to 40 cents per gallon.
“It is not a whole lot of relief, and it comes at the expense of cleaner air,” De Haan said.
A gas tax holiday is another fraught option. It takes away badly needed funding for roads and sends an artificial signal to consumers that prices are dropping and they can drive more, when the reality is the supply is still tight. Urging states to lower speed limits, De Haan said could go a long way toward helping consumers save on gas. But there is not a huge political appetite for that, either.
Soaring gas prices are just one element of the politically toxic economic reality Biden faces leading up to his address on Tuesday.
It comes in a week when the Bureau of Labor Statistics is likely to bring more bad news with its inflation report. As economists and policymakers look for any evidence that inflation has peaked, such as potential cooling in the housing market, there are not a lot of promising signs. Price growth has exceeded expectations more than a year, with the nation stuck in an inflation spiral.
Overall prices climbed 8.5 percent in March compared to the year before, with the rise driven largely by higher energy costs following Russia’s invasion of Ukraine.
A White House that was largely dismissive at the onset of inflation pivoted after price hikes persisted and voter anger grew. One remedy was supposed to be the administration’s Build Back Better agenda, centered around a legislative package aimed at lowering household costs. That package is stalled in the Senate.
That leaves the White House pointing instead to more modest measures, including the release of the Strategic Petroleum Reserve, according to a White House official, who spoke on the condition of anonymity to describe the speech ahead of its release. The White House also pointed to Biden’s action to extend a Trump-era freeze on student debt payments.
Scott’s tax proposals, coming at a time of economic pain for many Americans, has already opened up rifts within the GOP that Democrats plan to exploit. Senate Majority Leader Mitch McConnell (R-Ky.) denounced Scott’s plan but has refused to outline the GOP’s policy positions, arguing voters will find out once Republicans take back Congress. Scott, chair of the National Republican Senatorial Committee, also called in his 11-point plan for forcing Congress to have to reapprove every federal program after five years, a measure that would put entitlement programs such as Social Security and Medicare in jeopardy.
“The only economic plan Congressional Republican leadership has put forward is an ultra-MAGA proposal that would raise taxes on 75 million, primarily middle-class, American families while sunsetting vital programs like Social Security and Medicare,” the White House official said. “You can expect the President will talk about why that plan might make sense to people with memberships at Mar-a-Lago, but would be devastating for the middle class.”
As Biden tries to make the political case that he is doing everything he can to fight inflation, the corner of government that has the most authority to confront it is out of his control. The Federal Reserve, empowered to fight inflation by setting interest rates, is aiming to calm inflation with seven hikes this year. The second was approved last week.
Yet the extent to which those hikes will be effective in curbing inflation remains to be seen, as the Federal Reserve tries to chart a path to stop prices from continuing to surge without pushing the economy into recession.
“We understand the pain” of inflation, Fed Chair Jerome H. Powell told reporters last week. “It’s our job to make sure that inflation of that unpleasant high nature doesn’t get entrenched in the economy.”