By Rebecca Leber

Gas prices are still climbing, and President Joe Biden has nothing but bad options.

Last week, Biden called on Congress to suspend the federal gas tax for three months — a move that would lower gas prices by 18 cents per gallon. But the proposal for a gas tax holiday already looks to be dead. Republicans have remained firmly opposed, arguing the real problem is Biden’s climate agenda, and Democrats have also called it “shortsighted” to redirect the money away from roads.

That leaves Biden with just the limited powers of the bully pulpit to make a difference in costs. On Thursday, he used it to bring oil executives to the White House to meet with Energy Secretary Jennifer Granholm, after weeks of accusations that they are ripping off consumers.

The US would be a very different kind of economy if the president could simply turn on and off the faucet for oil. But by design, oil is a free and global market, one that in recent years has been shaped by a decade of low profit margins, turmoil from the pandemic, and Russia’s war on Ukraine. In March, I wrote about what to make of the political theater surrounding gas prices. The list of myths is getting longer as prices climb past $5 a gallon.

Myth 2: Oil companies are price-gouging American consumers

No quick fix came out of the oil industry’s meeting at the White House last week. But the oil industry lobby group, American Petroleum Institute, asked for a “tone shift” from the administration. Biden has said that oil companies are ripping off the American consumer by taking advantage of a war-time situation to reap massive profits. “To the companies running gas stations and setting those prices at the pump, this is a time of war, global peril, Ukraine, this is not normal times,” he said Wednesday. “Bring down the price you are charging at the pump to reflect the price you are paying for the product.”

Price-gouging typically means companies charging higher-than-usual prices in an emergency situation when people have no other options to turn to. Think if a supplier marks up the price of water bottles after a hurricane or selling face masks at a premium in a pandemic.

Oil companies making handsome profits is not necessarily the same thing as textbook price-gouging, or spiking prices when consumers have no other choice to turn to. Sam Ori, executive director of the Energy Policy Institute at the University of Chicago, acknowledged “there is a disconnect between the the price of crude oil and the price of gasoline at the pump in the United States right now, but that’s not because of price gouging.”

Oil prices were already increasing last fall, a sign that Russia’s war and the resulting sanctions are not the full story. The problem is refining. US refineries are operating at about 90 percent capacity right now. A major reason why is refineries have shut down in the past few years, outpacing the new refineries being built.

During the pandemic the US lost a 1 million barrels a day worth of refining capacity. A similar trend happened globally. There’s less refining capacity than before the crisis, but demand is back up to where it was before.

This issue is “very similar to lots of other elements of the pandemic supply chain,” Ori said. “Many of our key supply chains were battered during the pandemic and they have not ramped back up.”

Myth 3: Biden killed oil production

Fox News has been arguing that Biden’s so-called extremist green agenda is the real problem. In March, Republicans on the Senate Natural Resources Committee sent a letter to Biden claiming that he has shut down leasing for oil and gas and is holding back more production. “There has not been one lease sale on federal lands since you imposed a ban in violation of federal law,” the letter said. “No other major oil-producing nation shuts off its own reserves to production.” Sen. Joe Manchin (D-WV) echoed the myth at a hearing: “The time for leasing pauses has come & gone.”

To repeat it again: Biden has done nothing to halt oil leasing. In fact, the Biden administration has outpaced Trump in issuing drilling permits on public lands and water in its first year, according to federal data analyzed by the Center for Biological Diversity. His administration set a record for the largest offshore lease sale ever in the Gulf of Mexico last year, before a federal court blocked the lease sale for not considering climate impacts.

These canceled leases, and even a temporary pause on new federal leases in the first few months of Biden’s administration wouldn’t have helped in the current situation. Even if a lease sale is successful and finalized, it would take years to ramp up production. The marginal Biden measures — like reversing Trump-era environmental rollbacks — haven’t made any kind of dent in the global oil market.

“The constraints are within the industry itself, and have very little to do with any policies from the federal government,” Ori said. Oil companies are having other issues, too, such as accessing the labor and materials like steel needed for putting pipes in the ground.

Myth 6: The economy is doomed because of high gas prices

It’s understandable to feel grim about the economy when gas price signs are listing anywhere between $5 and $7 per gallon. But remember that oil and gas aren’t the entire economy. A better metric than absolute gas prices is looking at Energy Information Administration data on the percentage households are spending on gas. That ratio is still around 3 percent, not much higher than where it was pre-pandemic.

At the last gas price peak in 2008, it was around 5 percent, but thanks to better vehicle mileage, greater access to hybrids and electric cars, and richer households, the number is climbing much more closely than we’d might expect.

There’s an important lesson in this data. Climate policies can pull double-duty to both tackle fossil fuel pollution and help people become more self-sufficient from oil during its booms and busts.

Countries have still not learned that “part of what we’re seeing here is the cost of reliance on fossil fuels,” Ori said. But clean energy isn’t a panacea either. “Once you’re in the [energy] crisis, it’s too late,” he added.

Continue Reading at Vox…

Areas of Focus: Energy Markets
Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Mobility is central to economic activity. Yet, a lack of fuel diversity and continued demand growth have made the transportation industry a major contributor to global pollution and carbon emissions....
The Russian-Ukraine Crisis: Impacts on Energy
The Russian-Ukraine Crisis: Impacts on Energy