Maybe this is the “historic” part of Karine Jean-Pierre’s claim to CNN’s Don Lemon last night that Joe Biden has put America in a good economic position. “Historic” certainly describes the position American consumers face when pumping gas into their vehicles. If yesterday’s data from AAA and the Washington Post made the record unofficially official, the EIA’s official finding confirms that gas prices not only hit a new record, but also rose thirteen cents in a week to land at $5.107 per gallon.
To see the novelty of the price hikes over the past fifteen months, let’s take a look at the chart for the last six years:
Just to put this in perspective, let’s recall that the rise in gas prices actually stalled in April. Since then, however, prices have risen 89 cents a gallon, a 21% increase in just six weeks and a hammer blow to consumer reserves. Prices have risen by 51% since the start of the year, a massive rate of inflation not just in gas prices but also infecting the prices of most consumer goods and services as well.
The Biden administration has all sorts of excuses for this, including “Putin’s price hike,” but the acceleration of gas prices began in the spring of 2021, long before Vladimir Putin began staging troops on the border of Ukraine. The sharp increase in gasoline is far more correlated to Biden’s energy policies as encapsulated in his Executive Order 13990, which imposed serious regulatory burdens on oil and gas exploration, extraction, and refining. It also killed any impulse for investment in this sector, as Biden himself repeatedly insisted was his goal.
Oddly, a New York Times explainer on gas prices today completely misses Biden’s “incredible transition” and regulatory changes:
Oil companies have been slow to respond to the rebound after laying off workers and decommissioning rigs during the pandemic slump.
There have been two oil price crashes in the past eight years, and many executives believe that another one is inevitable. That has made them hesitant to drill new wells and seriously ramp up production, said Christopher Knittel, an energy economist at Massachusetts Institute of Technology. The lack of investment has led to a decline in output in recent years.
Companies have instead been directing profits to shareholders in the form of dividends or as share buybacks.
“Even though they see high prices today, they’re afraid that prices are gonna tank over the life of that well,” Mr. Knittel said of industry executives. “They also have this expectation that electric vehicles are going to continue to grow, which means that 10 years from now, that oil well may not be earning profits. And so all of that is creating a disincentive to drill.”
That’s not the only reason that capital investors are shunning expansion in oil and natural gas. Joe Biden has sent a multitude of signals that he plans to kill off the fossil-fuel industry in favor of his “incredible transition” to renewables. The kind of production and refining expansions needed now require massive capital investments for long-term commitments. Biden may be desperate for additional capacity for the moment, but long term he plans to make those obsolete long before that kind of capital investment would pay off. Hence, investors are looking elsewhere for entirely rational reasons.
That means the current rise in energy prices will not get any better, nor will the inflation that it’s fueling. Demand from summer travel is rising, and American production of gasoline is falling at the same time:
The bad news is that gas prices could continue to climb. Both Gas Buddy and AAA said new data from the Energy Information Administration showed total domestic gasoline stocks decreased by 800,000 bbl to 218.2 million bbl last week. But as stocks decreased, gasoline demand rose from 8.98 million barrels per day to 9.2 million barrels per day.
“This dynamic between decreased supply and increased demand is contributing to rising prices at the pump. Coupled with increasing crude oil prices, this means that the price of gas will likely remain elevated for the near future,” AAA said.
The Energy Information Administration said oil price volatility will remain high due to what it calls low oil inventory levels. Prices will depend on “the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.”
You know what could help that? More refining capacity, more production of US crude, and better transport between the two. Those are precisely the options that Biden’s EO 13990 precludes by making the cost so high and the investment so unpredictable that no one with any sense will opt to take that risk. And that was exactly what Biden had in mind for his “incredible transition” too, a point which the NYT explainer conveniently leaves out.
In other words, get ready for lots of new records from the EIA over the summer, and likely even beyond it, unless Biden completely reverses himself on energy policy. Thus far, though, Biden hasn’t even recognized his failures, let alone taken any rational action to reverse them. For that, it will take a massive turnout in the midterms to deliver a message of discontent. And it’s coming, too.
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
Update: Our colleague Matt Margolis made an interesting catch at PJ Media. Even in December, as the winds of war began first stirring in Ukraine, the Biden administration predicted that gas prices would remain stable in 2022 at $2.88 per gallon:
U.S. regular gasoline retail prices averaged $3.39 per gallon (gal) in November, a 10 cents/gal increase from October and $1.29/gal higher than in November 2020. The November monthly average was the highest since September 2014. We forecast that retail gasoline prices will average $3.13/gal in December before falling to $3.01/gal in January and $2.88/gal on average in 2022.
Even apart from the war in Ukraine, which US intel had already started to warn would unfold, this prediction was absurd. How did Biden and his team predict gas prices would fall while the economy expanded and Biden kept obstacles in place for new drilling and refining?