On March 31, 2022, Joe Biden announced a one million barrel a day release from the Strategic Petroleum Reserve, a political emergency rather than an actual one, that was to continue for 180 days. That policy ends as the calendar rolls into October, leaving the SPR at its lowest level since 1984.
This release is not so much an energy policy as it’s much closer to a 6-month payroll advance loan.
The message from the White House would have you believe that it’s this direct action of the President that has resulted in falling gas prices since it peaked on June 14th at $5.02. That message is as ignorant of market forces as it’s disingenuous.
Team Biden is hopeful that the new “cheap” gas Biden has provided will temper the sour mood of the electorate on inflation/economic issues, and allow Congressional Democrats to win the midterms on abortion and why Donald Trump and everyone who voted for him are the worst human beings ever to walk the planet.
What the President and his economic advisors either do not understand about the basic workings of the supply/demand curve, or do understand and openly lie about it, is that the fall in gas prices had very little to do with the release of oil and more to do with the American people responding to record gas prices, and its effect on household incomes, and they began to change their behavior. They went out less. They drove less. Some cancelled vacations. Others went on the post-COVID trip they planned this summer, but after that, cut way back due to it being so expensive. That caused a drop in demand, which is what began driving the prices down. The supply of gasoline really hadn’t changed a whole lot…until now.
The theory, if there is one, behind the release of oil from the SPR was that this oil, meant for national emergencies or a hedge against a supply chain crisis that would potentially starve the military in wartime, was cheaper when it was bought and stored, and that this release of lower per barrel oil would drive the overall price of oil down. Again, it’s an advance, or a loan, not a gift. That oil will eventually have to be put back into the SPR, although not by this administration. More than likely, Biden will leave the tab of refilling the SPR to the next president. By the way, the oil that came out? It cost originally around $20 bucks a barrel. Current replacement value of putting it back in? Around $80/barrel. That’s the Democratic Party way – sell low, buy high.
Back to the messaging, though. Joe Biden trotted out his latest attempt at a Jedi mind trick when he spoke recently to a rally of NEA union members. He just casually threw out there that in 41 states, including the District of Columbia, the average price of a gallon of gasoline was $2.99. It was, and is, flat-out untrue. The average price among all 50 states was $3.67 when he made those remarks. I’m no mathematician, but you can’t get to what Biden said with the national average being that much higher.
Since we’re talking about Joe Biden, who still tells the fable of Angelo the train conductor and that he talked about gas prices around the kitchen table growing up in the 50’s, which didn’t happen because gas was about a quarter a gallon then, one might discount that off-the-cuff remark as Joe just being Joe again. The problem is he repeated the claim in the Cabinet room last week.
The day he said that, the average daily price of gasoline had already been creeping back up, climbing to $3.74. Naturally, neither Biden nor his team at the White House have addressed what everyone is starting to see, which is the price of gasoline is headed north again. Instead of being honest about what’s happening, he resorted to another one of his staples from the unifying grab bag – blaming the rising costs on gas stations, demanding that they just lower the price.
That’s not how any of this works, and it’s infuriating that he’s essentially scapegoating a ton of independent small business owners who have as much control over the price of gasoline as you or I do. So since he won’t talk about why prices are climbing again, I will, so you understand why and how to vote accordingly.
Gasoline price is a function of not just the spot price of oil, but it also relies heavily on U.S. refining capacity. The oil is the raw ingredient, but it’s useless unless it’s refined into what goes into your tank. There was a small refinery that came online in North Dakota in 2020, but before that, the last major refinery built in the United States was in 1976. Want to take a guess how many cars were on the road in the United States then? About 140 million. Today, we’re in the neighborhood of 280 million of them, much to the chagrin of Pete Buttigieg and Jennifer Granholm, very few of them are electric. We’ve doubled the amount of cars on the road.
Now let’s take into consideration population. In 1976, there were 218 million Americans consuming fuel, even if they didn’t own a car. Anything people buy or use is based upon a supply chain that has trucks, ships, trains or delivery cars involved in getting stuff from manufacturing to ownership. In 2022, the U.S. population is a little over 332 million people. So just to check the scorecard, we have twice as many cars and 114 million people’s worth of infrastructure growth. That’s a lot of pressure on existing refining capacity to stay well north of 90% in order to keep up with the growing demand.
Now add in a fire at the refinery in Toledo, Ohio, causing other refineries to siphon off gas from their regions to kept the Upper Midwest with some supply, and refineries out west having to go down with planned maintenance and repairs after a summer of running at full capacity, and hurricane season now threatening the refineries in the Gulf, there are going to be disruptions in refining capacity for the foreseeable future. And that means gas, regardless of the price of oil, is going to go up. Joe Biden’s answer of telling gas station owners to just drop the price is something I would expect out of a second grader, not a politician that’s been in Washington for 50 years.
As early voting begins in some states, and the rest of the country going to the polls in a month or so, gasoline and the price of everything that it touches or moves around the country climbs again, no Joe Biden wishcasting is going to help out Democrats with their closing message. People who see another jump in inflation, another jump in interest rates, and $4 dollar gas being referred to as the good old days are not going to be very forgiving at the ballot box. Joe Biden can try his Obi-Wan ‘this is not the rising gas prices you’re seeing’ all he wants. Voters are going to see James Carville as Yoda saying ‘It’s the economy, stupid.’
