Biden Can Lower Gasoline Prices Now

On Saturday, as Americans were preparing for Independence Day celebrations, President Biden tweeted: “My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril. Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.”

The bad news: gasoline prices won’t go down with President Biden’s tweets. The good news: the President could reduce gasoline prices if he changed his policies.

Through executive orders and rules from his agencies, President Biden has inhibited oil and natural gas from being produced and refined in the United States, resulting in oil prices over $105 per barrel.

This can be reversed as fast as it was put into place. By announcing a new policy focused on increasing rather than decreasing American energy production, President Biden could change expectations about the direction of U.S. energy production, resulting in an immediate decline in the price of oil. Prices are set on expectations of future production, not on present production.

That’s why oil prices rise when a hurricane is forecast in the Gulf of Mexico, before one single rig has been harmed by the storm. An honest change in direction—not band-aids such as drawing down the Strategic Petroleum Reserve, using the Defense Production Act to increase renewables, temporarily eliminating the Federal gas tax, or tweeting at gas station owners to reduce prices—would change expectations, lowering prices.

We’ve seen this script before—undue governmental overreach shuts down supply, prices rise, the President tries to tweet prices down.

When the Food and Drug Administration closed the Abbott factory that produced 42 percent of America’s baby formula, resulting in shortages and higher prices, President Biden on May 13 tweeted, “Parents looking to feed their child should not be taken advantage of by retailers unfairly jacking up prices. I’m calling on the FTC and State Attorneys General to crack down on price gouging and unfair market practices related to the sale of infant formula.”

President Biden is deliberately limiting domestic oil production and pipeline construction while at the same time calling on Venezuela, Saudi Arabia, and Iran to expand their production of fossil fuels. Fossil fuels produced abroad affect global emissions as much if not more than fossil fuels produced here at home.

The price of gasoline rose by 49 percent between May 2021 and May 2022, and the price of energy rose by 35 percent, according to the Bureau of Labor Statistics. Energy commodity costs have risen much faster than the average annual inflation rate of 8.6 percent. New data for June will be released on July 13.

The United States, as the world’s largest oil and gas producer, has demonstrated the ability to affect the price of oil. A dramatic transformation in energy production took place between 2008, when the United States was producing just 5 million barrels per day in 2008, and 2020, when production reached over 12 million barrels per day.

In March, only 662 oil and natural gas rotary rigs were in operation, according to the Energy Information Administration’s data series, compared to 790 in March 2020, 1,023 in March 2019 and 989 in March 2018. (In 2020 and 2021 demand was lower due to the pandemic.) Excluding the pandemic and four other years, the figure of 662 rigs in operation is the lowest March count since the Energy Department began keeping count in 1973.

President Biden reduced oil and gas production by expanding the boundaries of the Grand Staircase-Escalante, Bears Ears, Northeast Canyons, and Seamounts Marine National Monuments, preventing oil and natural gas production there.

He placed a moratorium on leasing activities in the Arctic National Wildlife Refuge and revoked the permit for the Keystone XL pipeline, which would have brought 850,000 barrels of oil per day from Canada to be refined in U.S. refineries.

Using existing pipelines, Canada could supply the United States with an additional 250,000 to 400,000 barrels a day, which is refined by U.S. refineries, creating jobs and contributing to GDP growth.

The Federal Energy Regulatory Commission issued a new policy on February 17, 2022, that will make it even harder to put new pipelines in place to carry oil and gas from the interior of the country to the coasts, where it can be exported. FERC will now “consider a proposed project’s impacts on existing pipelines” as well as the environmental effects of the new pipeline.

In November 2021, the Interior Department called for fewer leases, higher royalties from oil and gas leases, and a more thorough bidding process to screen buyers, making drilling more difficult. The Interior Department proposes that oil and gas drilling not be a priority.

In April the Council on Environmental Quality reversed changes that President Trump had made to National Environmental Policy Act regulations. The new regulations, effective in May 2022, made it more difficult to build infrastructure, including for energy production.

Even the Securities and Exchange Commission wants to regulate energy production. On March 21, 2022, SEC Chairman Gary Gensler proposed rules to require companies to disclose information about governance and management of climate-related risks; how climate related risks will affect companies’ strategy and outlook; and the effects of climate events such as hurricanes and wildfires on financial statements.

President Biden is complaining about high prices even as his executive branch agencies are restricting oil and gas production in multiple ways. Rather than tweeting, how about a change in the agenda?