Did anyone hear about this new milestone on Joe Biden’s “incredible transition“? The new EIA calculation on the average gas price across all formulations didn’t make much of a splash last night, but it’s certainly worth noting. It nearly crossed the $5 mark two full weeks before my prediction last week, and may even cross that line sometime today, albeit without an official measure until next week. The new price of $4.977 per gallon is 102% higher than when Biden took office and 47% higher than the price at the start of the year.

Rather than use the same 30-year chart the EIA provides (and that I have used repeatedly already), I downloaded the data and charted the price over the last six years. Take note that the upsurge in price began in March 2021, and has only moderated occasionally since then on a historic slope upward:

Oddly, that news didn’t get a lot of play in the media. Fox News covered it from the unofficial (but still reliable) calculations from AAA, which does do daily averages:

The average price for a gallon of gasoline in the U.S. surged early Tuesday to $4.919, a 5.4 cent hike overnight from Monday’s $4.865, according to the latest numbers from AAA.

Sunday, the price for that same gallon of gasoline stood at $4.848, topping Saturday’s price of $4.819. Overall Tuesday, the price of gasoline rose about 10 cents since Saturday.

Forbes covered a broader range of local and regional records ($9.46 in Mendocino, CA!), but also added some analysis:

The big culprit of course is the soaring price of crude oil, up $16 a barrel in the last month to $119, for benchmark West Texas Intermediate. But the oil price alone doesn’t explain doesn’t explain why gas is so much more expensive now than it was in March when crude oil first spiked higher than $130 per barrel following Russia’s invasion of Ukraine.

Basic supply and demand is an important factor. Developed world inventories are now at seven-year lows of 2.6 billion barrels of oil and petroleum products, 300 million below the five-year average. Gas inventories in the U.S. have sunk from 246 million barrels at the end of February to 219 million barrels last week, according to the Energy Information Administration. With refineries and oil companies pumping at maximum capacity, there’s precious little supply cushion to meet rampant demand for fuels, paired with the loss of millions of barrels per day of Russian supplies due to sanctions.

According to the Dallas Federal Reserve, only 1% of gas stations in America are owned by companies that also produce oil, and to acquire their wholesale supply they’re at the mercy of refineries, the intermediary between crude oil pulled from the ground and refined gasoline that can actually be pumped into cars. Crude oil accounted for 59% of the price of regular gasoline in March 2022, but 18% was refining costs, and this fraction grows when there are regional disruptions. Pricing can be hyperlocal. When a California refinery shut down for power outages in March, it led to higher prices in California and Arizona despite prices falling in much of the country as crude oil retreated.

Refining capacity is a major part of the problem, but again that can be traced at least in part to adverse policies from the Obama and Biden administrations. Both erected a number of regulatory obstacles to building new refineries. The policy hostility toward refining of oil has at the same time chased off the investors needed to build new plants and new capacity (as well as the capital needed to expand exploration and extraction). The result is a bottleneck that will exist even when crude oil supplies become plentiful again, especially given the necessity of specialty formulations such as those demanded in California, for instance.

And refinery capacity is actually decreasing rather than staying constant, as the EIA noted a year ago:

As a result of several U.S. refinery closures in 2020, U.S. operable atmospheric crude oil distillation capacity, the primary measure of refinery capacity in the United States, dropped 4.5% to a total of 18.1 million barrels per calendar day (b/cd) at the start of 2021. The end-of-year 2020 total is 0.8 million b/cd less than the 19.0 million b/cd of refining capacity at the start of 2020. According to the data in our annual Refinery Capacity Report, the beginning of 2021 marks the lowest annual capacity figure to start the year since 2015. Based on information reported to us in our recent update, U.S. refining capacity will not expand significantly during 2021.

At the beginning of 2021, 129 refineries were either operating or idle in the United States (excluding U.S. territories), down from 135 operable refineries listed at the beginning of 2020. The additional refinery closures in the 2021 Refinery Capacity Report largely reflect the impact of responses to COVID-19 on the U.S. refining sector.

In 2019, the 335,000 b/cd Philadelphia Energy Solutions (PES) refinery in Philadelphia, Pennsylvania, experienced a major refinery incident. It has not resumed operation since the incident. We listed the facility as idle in the 2020 Refinery Capacity Report because the decision to permanently close the facility was not final. As of January 1, 2021, we considered the refinery to be permanently closed, and it is not included in our 2021 report.

The decline has been fairly sharp over the last couple of years, as this chart from EIA data shows:

Some of this can be explained by the drop in demand during the pandemic. Now, however, we’re well past the pandemic and our refining capacity keeps dropping, in part because it’s either aging out or in need of extensive restoration. If this administration wanted to do something about gas prices, it should accelerate either expansion of existing refineries or incentivize the rapid addition of more refineries to produce more gasoline. Instead, Biden’s EO 13990 adds more red tape to any attempts to add to the “processing” of oil and gas products. Even if investors were inclined to invest in this sector with Biden’s expressed hostility toward fossil fuels, the regulatory hurdles his administration has already erected and will likely continue to erect would chase off most capital holders — and it has.

All of this is by design, let’s not forget:

Joe Biden: "When it comes to the gas prices, we're going through an INCREDIBLE transition" pic.twitter.com/8TGnc7vFa8

— RNC Research (@RNCResearch) May 23, 2022

And when it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over.

We won’t be less reliant, but we will be poorer. Bet on $5.20 a gallon in the next EIA report on June 13.

Update: Just to answer some questions from social media, this is not a demand issue. The EIA data show clearly that this is a supply issue, and that supply is declining in gasoline especially: