The sticker shock comes as Biden is expected to outline his latest plan on Tuesday to reduce pricing pressures across the economy that have severely hurt his popularity. Biden will try to blame Republicans for the country’s economic challenges, pointing to Sen. Rick Scott’s (R-Fla.) plan, released earlier this year, for a minimum federal income tax. About half of Americans currently pay no federal income tax because they don’t earn enough.
The remarks come ahead of what will likely be tougher news for the White House, when the federal government releases its latest inflation data mid-week.
Why Gasoline Prices Remain High Even as Crude Oil Prices Fall
No place is more obvious than at the gas station.
“The tools the federal government can use to influence pricing are limited,” said Devin Gladden, federal affairs manager at AAA National. “They already use almost the entire toolbox.”
This month’s hike, Gladden said, is largely a response to the European Union’s announcement that, with few exceptions, it aims to stop all imports of Russian oil by the end of the year. of the year in response to the invasion of Ukraine. This decision has a far greater impact on global markets than any short-term action the administration can take to mitigate its impact.
Analysts warn that it could be a long time before prices come back down significantly. At the very least, the summer will likely be long and difficult for drivers.
“No one has any idea how long this war will last or how long and how big its global energy impact will be,” said Edward Chow, an energy security specialist at the Center for Strategic and International Studies who worked previously in the oil industry for decades. He said the reshuffling of the world oil export map could leave America facing the kind of protracted and skyrocketing prices it experienced during the OPEC embargo of the early 1970s and the Iranian Revolution. that followed later that decade.
“It may well be bigger and last longer,” he said. “You just can’t take the country that was the world’s largest combined oil and gas exporter off the chart without a major impact.”
The challenge for the United States is compounded by a pandemic in which demand initially fell so low that at one point oil was trading at zero dollars a barrel. That, combined with market uncertainty as the United States and Europe rush to switch from fossil fuels, has given oil companies little incentive to invest in expensive new drilling infrastructure. This stuff doesn’t go back in days or weeks.
It’s not just about increasing crude oil throughput. The United States’ ability to refine it has declined as older, dirtier and less efficient facilities have been replaced with updated refining equipment, said Kevin Book, chief executive of ClearView Energy Partners, a company of research. The Nations refining capacity, he said, is considerably lower 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 here, right now.
Biden struggles to improve Americans’ view of the economy
The other remedies that might marginally help right now are not politically acceptable at all. One of them, said Patrick De Haan, head of petroleum analysis at Gas Buddy, is relaxing environmental rules for gasoline during the summer months in major metropolitan areas. Suspending requirements that cleaner mixes be used in these places, he said, could lower prices by 20 to 40 cents per gallon.
“It’s not much relief, and it comes at the expense of cleaner air,” De Haan said.
A gasoline tax exemption is another difficult option. This takes away much-needed funding for the roads and sends an artificial signal to consumers that prices are falling and they can drive more, when the reality is that supply is still limited. Urging states to lower speed limits, De Haan said, could go a long way to helping consumers save gas. But there isn’t a huge political appetite for it either.
Soaring gasoline prices are just one element of the politically toxic economic reality Biden faces ahead of his speech on Tuesday.
That comes in a week when the Bureau of Labor Statistics is likely to bring more bad news with its inflation report. While economists and policymakers are looking for evidence that inflation has peaked, such as a potential cooling in the housing market, there aren’t many promising signs. Price growth has exceeded expectations for more than a year as the country is stuck in an inflationary spiral.
Overall prices rose 8.5% in March from a year earlier, with the rise largely due to higher energy costs following the invasion of Ukraine by Russia.
A White House that was largely dismissive at the onset of inflation pivoted after price hikes persisted and voter anger grew. One of the remedies was supposed to be the administration’s Build Back Better program, centered on a legislative package aimed at reducing household spending. This package is blocked in the Senate.
That leaves the White House pointing instead to more modest steps, including releasing the Strategic Petroleum Reserve, according to a White House official, who spoke on condition of anonymity to describe the speech ahead of its release. The White House also highlighted Biden’s move to extend the Trump-era freeze on student debt payments.
Scott’s tax proposals, which come at a time of economic hardship for many Americans, have already opened divisions within the GOP that Democrats plan to exploit. Senate Majority Leader Mitch McConnell (R-Ky.) denounced Scott’s plan but declined to outline GOP policy positions, arguing that voters will find out once Republicans take over Congress. Scott, chairman of the Republican National Senate Committee, also called in his 11-point plan for requiring Congress to have to reapprove every federal program after five years, a move that would jeopardize rights programs such as Social Security and the Health Insurance.
McConnell rejects GOP Sen. Rick Scott’s tax plan and agenda
“The only economic plan Republican leaders in Congress have proposed is an ultra-MAGA proposal that would raise taxes for 75 million, mostly middle-class American families, while canceling vital programs like Social Security and insurance. -disease,” the White House official said. “You can expect the president to explain why this plan might make sense for people who are members of Mar-a-Lago, but would be devastating for the middle class.”
While Biden tries to make the political case that he is doing all he can to fight inflation, the corner of government with the most authority to deal with it is beyond his control. The Federal Reserve, empowered to fight inflation by setting interest rates, aims to calm inflation with seven hikes this year. The second was approved last week.
Still, how effective these hikes will be in curbing inflation remains to be seen, as the Federal Reserve tries to chart a course to prevent prices from continuing to soar without pushing the economy into recession.
“We understand the pain” of inflation, Fed Chairman Jerome H. Powell told reporters last week. “It’s our job to make sure that inflation of this nasty nature doesn’t take hold in the economy.”