Gas prices in many parts of the country today look like high GPA numbers. People are angry that a gallon of gas costs more dollars than they have cylinders in their car. Do not expect any answers from the White House, however; “I don’t have a near-term answer,” said President Joe Biden at a recent town hall.
Ironically, the answer is quite simple: just reverse the ill-advised policies that are adding to the cost of gasoline.
For an immediate impact, the myriad of blending and additive regulations for reformulated gasoline, such as ethanol and other oxygenates, could be temporarily suspended. This would directly reduce refinery costs and lower prices at the pump.
If Congress is determined to spend money on the problem, they could suspend the federal tax of 18.4 cents per gallon, saving the average family over $300 a year. The foregone revenue from this “tax cut” would be a far better budget item than the multi-trillion-dollar so-called infrastructure bills that Congress has not even read. The “green energy” policies in these bills will only add to the cost of gasoline.
For a longer-term impact, the next step is to get more American oil supply, of which gasoline is a byproduct, to the market. That can only be achieved by ending this administration’s war on domestic reliable energy production.
The White House has repeatedly begged OPEC+ to pump more oil, while hamstringing production here at home through its promises of more regulations and taxes on the oil, coal, and natural gas industries. With these impending costs, domestic producers of reliable energy have little reason to expand capacity, drill new wells, refine more oil into gasoline, dig more coal, or invest in their businesses.
The White House has made abundantly clear its desire to decrease domestic reliable energy production. Immediately after taking office, President Biden cancelled the Keystone XL Pipeline with an executive order. He then gave a Russian pipeline the green light to be fast-tracked to completion.
More recently, the administration has abandoned an oil and gas drilling project in Alaska, despite predicting that home heating costs could be 54% higher for Americans this winter, and with average gasoline prices over $3 per gallon. The administration has also attempted to ban drilling on federal lands.
These impolitic decisions have increased the nation’s consumption of foreign energy, with imports of Russian oil reaching a record high. Meanwhile, fuel import prices have increased 68.7% in the last year. Not only is the nation importing more energy, but it is doing so in an environment of skyrocketing prices.
Natural gas, home heating oil, and propane are all seeing inventories fall and prices rise. Propane inventories are dangerously low with prices already near record highs. Some analysts predict heating costs may triple this winter.
The dizzying climb of natural gas prices will have additional catastrophic cascading effects as the higher cost ripples through the economy. Natural gas is used to make plastics, fertilizers, chemicals, and even engine oil, along with countless other products that are components in innumerable goods. Higher natural gas prices make nearly everything more expensive, including food. This is in addition to the increasing costs of the electricity used to power factories and gasoline to fuel delivery trucks.
Contrary to the White House’s talking points, higher energy prices are not “because of the supply being withheld by OPEC.” Domestic producers have been discouraged from bringing additional reliable energy to the market. If the administration reversed course on its anti-energy policies, then America’s energy producers would have an incentive to drill, mine, and refine additional supply, and prices would fall. Unleashing America’s energy capacity and entrepreneurial spirit would help provide a long-term pathway for energy independence and lower energy prices.
The other component of a long-term solution will be to take a page out of the playbook of Paul Volker – the Federal Reserve chairman who slammed the brakes on the vertiginous inflation of the late ‘70s and early ‘80s by stopping the Fed’s money spigot. The Fed’s current inflation creation has contributed to the cost of gasoline, just like it has added to the cost of everything else.
Unfortunately, the White House refuses to acknowledge that inflation is not transitory, just as the administration is ignoring the real problems in the energy markets.