Why it’s so hard to do something about rising gasoline prices: NPR

High gasoline prices are posted at a gas station in Beverly Hills, California, on November 7th. Gas prices are rising across the country, but there is actually not much the Biden administration can do.

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High gasoline prices are posted at a gas station in Beverly Hills, California, on November 7th. Gas prices are rising across the country, but there is actually not much the Biden administration can do.

Damian Dovarganes / AP

You probably do not need a news report to tell you that gasoline prices have risen. Prices are at their highest in seven years, which is more than a dollar higher than a year ago.

Rising energy costs, including petrol as well as natural gas and coal, are a major driver of high inflation. It puts pressure on household budgets and creates a major political problem for the Biden administration.

The president recently said that fighting inflation “is a top priority for me” and his administration has repeatedly hinted at the possibility of some form of action to push down petrol prices.

So what can the president really do? As it turns out, not much.

“It’s a huge toolbox, but most of the tools are not that useful,” said Kevin Book, CEO of Clearview Energy Partners. “That’s kind of the problem most presidents have.”

Here’s a look at some of the options that Biden has at its disposal and why there are so many disadvantages.

A look at some of the tools available

Increasing the global supply of crude oil will lower prices. But US presidents do not have a direct way of doing this. U.S. oil companies are responsible to shareholders and owners, not to the government.

Unlike most members of OPEC, the powerful cartel that has a direct impact on oil production, “we do not have a national oil company with the spare capacity to bring to market,” notes Book.

So while, for example, the king of Saudi Arabia may just decide to pump more or less oil, the president does not have that option.

He able to, of course, ask the members of OPEC to bring more oil to market – and the Biden administration has done so. The answer was no.

President Biden is waiting to talk about the newly enacted law on infrastructure investment and jobs in the Port of Baltimore, Maryland, on November 10th. During his speech, Biden acknowledged that inflation is rising and said his infrastructure plan would help ease some of the price pressure.

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President Biden is waiting to talk about the newly enacted law on infrastructure investment and jobs in the Port of Baltimore, Maryland, on November 10th. During his speech, Biden acknowledged that inflation is rising and said his infrastructure plan would help ease some of the price pressure.

Drew Angerer / Getty Images

Another option is to release oil from the Strategic Petroleum Reserve (SPR) – the stock of crude oil that the US government stores underground so that the country can cope with any unexpected disruption in the crude oil supply. Sometimes the oil is also sold off to raise money.

It is not really meant as a tool to control prices, but hypothetically, releasing a lot of oil from the reserve would increase supply and push prices down – at least for a while.

But the amount of oil in the reserve is limited, and Louise Dickson, senior oil market analyst at Rystad Energy, says a one-time release “is not a lasting solution to an imbalance between supply and demand.”

And because SPR stores crude oil, not gasoline, it would not immediately push prices down at the pump.

Coordinating publications with other countries that have strategic reserves can help increase the impact – but that puts Biden back in the position of relying on diplomatic persuasion.

Some suggestions may backfire

More drastic alternatives have drawbacks. The United States could ban the export of crude oil, which now forms a large part of the American oil industry.

But Book from Clearview says a ban on exports could backfire. It would push US oil prices lower, but it would encourage domestic oil production to fall – which in turn would reduce the global supply of crude oil and push prices even higher overall.

And the United States also imports some types of oil. These shipments would continue and these importers would feel the pinch of rising international prices, which would potentially wipe out any relief for gasoline prices.

Then there is the idea of ​​reviving “NOPEC” legislation, which would allow the United States to sue OPEC members for secret cooperation. The idea has been floating around Capitol Hill for years and always gets new attention when oil prices rise.

Energy Minister Jennifer Granholm spoke to reporters at the White House in Washington, DC on May 11. Granholm recently said that the administration is looking at ways to curb high energy prices.

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Energy Minister Jennifer Granholm spoke to reporters at the White House in Washington, DC, on May 11. Granholm recently said that the administration is looking at ways to curb high energy prices.

Drew Angerer / Getty Images

Going after OPEC can push prices down, but it can also make prices much more volatile, as well as open up a diplomatic can of worms at risk of countries taking revenge.

This is also not something Biden could do unilaterally – it would require the action of Congress.

“I still believe we are a long way from the realistic prospect of a NOPEC passage, in part because Republican lawmakers appear to be content to blame the current energy crisis on Biden’s domestic energy policy and perceived hostility to domestic energy production. , “says Helima Croft of RBC Capital. .

Another option, which It writes Bloomberg The White House is considering would be to ease some requirements that refineries use a certain amount of biofuel, such as ethanol, in their gasoline blends.

Refineries have long complained that the rule imposes unnecessary costs and makes gasoline more expensive, but it has the strong support of the powerful farm lobby in Congress.

Symbolic action is the most likely outcome

The book assumes that the most likely approach is a release from the strategic oil reserve.

Congress has already ordered some oil released from the reserve in the coming years. The bite could move around at the time of when that oil is released, to push more out now, instead of making a dramatic emergency release.

The pressure to do something solving the problem is just too big, he says, and action would show that the administration is taking this seriously.

“I feel like your pain can be an important political message,” Clearview’s Book says. “It’s not going to do much for the wallet, though.”

What can help on that front is simply time. The Danish Energy Information Agency predicted in its monthly report on the oil markets that oil prices will start to fall next year. OPEC also predicts a surplus of oil in 2022.

No one in the oil industry is missing the irony at this moment: Major world leaders are calling for oil consumption to fall dramatically in the coming years to reduce the catastrophic consequences of man-made climate change.

But in the short term, Biden and other leaders are desperate for energy prices and eagerly welcome the prospect of increasing oil production.

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