While on a multi-state tour promoting the administration’s climate credentials, President Biden admitted during an interview with the Weather Channel that he tried to “stop all drilling on the east coast, and the west coast, and in the Gulf,” but was stymied by court orders including a Louisiana district court judge’s 2022 ruling that overturned Biden’s ban on oil and natural gas production on federal lands.
The rule of law wasn’t the last word, apparently – the President said that he is “still pushing” very hard to end drilling, even as gas prices and inflation tick upwards.
Gas Prices Creeping Up to 2022 Levels
The timing of Biden’s statements coincides with a period of heightened volatility in global oil markets and a notable surge in domestic gas prices – factors that President Biden’s own cabinet has pointed out while making conflicting appeals for more oil and natural gas production.
Just last month, U.S. Energy Secretary Jennifer Granholm told CNBC that volatility is still weighing on oil markets and called for more supplies:
“We want to see more supply … It gets dangerous when the prices are so high… I think the prudent course is to ensure that transportation is affordable for people, and that of course means making sure that supply is stable.”
Since then, gasoline prices in the United States have once again embarked on an upward trajectory, worsening the inflation pressures that have challenged policymakers and the Federal Reserve for the past year. In the last month, AAA data revealed that the average cost of a gallon of gasoline has surged by over 8 percent to above $3.80 on average nationwide. In California and Washington, the average price for a gallon of gas currently hovers around $5.
If you’re getting déjà vu, you’re not alone – prominent economists have expressed concerns about an inflation pattern, termed an “inflation smile,” where prices stabilize for a few months before accelerating again in the fourth quarter of the year.
Several factors are contributing to increased gas prices in a tight market. OPEC+ and Saudi Arabia’s production cuts are one reason; this summer, OPEC+ states began enacting both planned and unilateral supply cuts that will continue to reduce the amount of oil on the global market.
Domestically, high temperatures, particularly in the southeastern United States, have caused some refineries to temporarily slow or pause operations for safety reasons. And state-specific policies, like Washington State’s new carbon pricing program, add additional costs for drivers.
Although all the factors are in place for another round of high fuel prices in the second half of the year, the Biden administration continues to send mixed messages to the domestic energy industry, creating more uncertainty and speculation in an already volatile market.
The state of the Strategic Petroleum Reserve adds another layer of concern. When gas prices spiked last year, the Biden administration tapped into the reserve to reduce prices and political pressures, but the administration has failed to fulfil on its commitment to replenish the crucial reserve, leaving consumers vulnerable to even more extreme price spikes driven by natural disasters or other external events.
Bottom line: As election season approaches, inflation will be top of mind for American voters. Instead of more mixed messages, the White House should be focusing on creating a stable policy environment so that the oil and natural gas companies can produce the energy needed to meet global demand and relieve inflationary pressures at home.
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