The Morning Jolt

White House

Biden Notices Gas Prices Are High

President Biden delivers a speech during a visit to the Port of Baltimore, Md., November 10, 2021. (Evelyn Hockstein/Reuters)

Today is Veterans Day; thank you, veterans, for all you’ve done and sacrificed to keep us the land of the free.

On the menu today: a deep dive into skyrocketing gas prices and the various policy moves that could be taken to alleviate the pain at the pump, and why President Biden — who yesterday exclaimed, “Did you ever think you’d be paying this much for a gallon of gas?” — is unlikely to embrace any of those options. Also, CNN’s Dr. Sanjay Gupta says the behavior of China and EcoHealth Alliance around COVID-19 is “suspicious.”

President Biden: ‘Did You Ever Think You’d Be Paying This Much for a Gallon of Gas?’
Yesterday’s Morning Jolt asked, “Is Biden Oblivious to a Mounting Economic Disaster?”

Yesterday afternoon in Baltimore, President Biden gave something of an answer, indicating that after U.S. gasoline prices have steadily increased each year, he is now noticing that the prices at the pump are exorbitant:

We got a higher demand for goods at the same time we’re facing disruptions in the supplies to make those goods. There’s a reci- — this is a recipe for delays and for higher prices, and people are feeling it. They’re feeling it. Did you ever think you’d be paying this much for a gallon of gas? In some parts of California, they’re paying $4.50 a gallon!

Is President Biden oblivious? Eh, maybe he just takes a long time to notice things.

According to the U.S. Energy Information Agency, the average retail price of a gallon of gasoline on the West coast was $4.10 as of October 21, a steady climb from $3.76 per gallon in May. (The numbers get updated on the 21st of each month. As of this morning, the American Automobile Association calculates that the average price of a gallon of gasoline in California is $4.64 — actually a bit higher than Biden’s “some parts” figure.)

Note that California’s state gas tax increased to 51 cents per gallon in July. In 2017, the state passed a law that automatically increases the gas tax incrementally each year to fund road and bridge repairs. Since 2017, the tax has increased by 21 cents.

California boasts that “More than 40 percent of the total containerized cargo entering the U.S. arrives through California ports. And nearly 30 percent of the nation’s exports flow through our ports.” Everything that comes through California has to get shipped out on trucks or trains that travel into and out of the Golden State, and those trucks end up paying that high gas tax.

Last month, Biden appeared at a CNN town hall with Anderson Cooper, and in a busy news cycle, not many people noticed Biden claiming, amidst his usual word salad, that there’s not much he can do about high gas prices:

COOPER: What about gas prices? Because some places are seeing . . .

BIDEN: Gas prices relate to a foreign-policy initiative that is about something that goes beyond the cost of gas. And we’re about $3.30 a gallon most places now when it’s up from — it was down in the single digits — I mean single digits, a dollar-plus. And that’s because of the supply being withheld by OPEC. And so there’s a lot of negotiation that is — there’s a lot of Middle Eastern folks who want to talk to me. I’m not sure I’m going to talk to them. But the point is it’s about gas production. There’s things we can do the in meantime, though.

COOPER: Do you think there’s a — I mean, do you see a — do you have a timeline for gas prices, when you think they may start coming down?

BIDEN: My guess is you’ll start to see gas prices come down as we get by going into the winter — I mean, excuse me, into next year, 2022. I don’t see anything that’s going to happen in the meantime that’s going to significantly reduce gas prices.

After talking about encouraging General Motors to build electric cars, Biden continued:

I must tell you, I don’t have a near-term answer. There’s two things I could do. I could go in the petroleum reserve and take out and probably reduce the price of gas maybe 18 cents or so a gallon. It’s still going to be above 3 bucks. And one of the things that I refuse to have happen, because I didn’t want anybody — I made a commitment if you pass the stuff I’m talking about, not one single penny in tax would go against anybody making less than $400 grand. And so if you notice, these highway bills are not paid for by gas tax. They’re paid for by direct expenditures in other areas. So no average person is going to have to pay more.

But it’s going to be hard. It’s going to be hard. There’s a possibility to be able to bring it down, depends on — a little bit on Saudi Arabia and a few other things that are in the offing.

When demand increases dramatically, the only thing that can bring prices down is a similarly dramatic increase in supply. Biden is essentially begging OPEC and other big oil-producing companies to increase production, to very little effect.

Right about now, a lot of readers are asking how the hell the United States, a country that became a net-energy exporter in 2019 and 2020 and that had cut its dependence on foreign crude oil by more than 50 percent from 2016 to 2020, is reduced to pleading with OPEC to increase production. America’s own oil producers are wondering the same thing, and they’re wondering why an administration that so desperately wants other countries to produce more oil seems so implacably hostile to the U.S. producing more oil.

Last month, the American Exploration and Production Council’s CEO, Anne Bradbury, argued that the administration and Congress are putting policies in place that will limit U.S. production, increase dependency on foreign imports, and drive up prices.

“The situation in Europe should serve as a huge warning to the Biden Administration and Members of Congress calling for punitive taxes, fees, and onerous new regulatory requirements on our industry,” Bradbury said in a statement. “By pursuing policies that restrict supply and make it harder to produce oil and natural gas here in America, Americans will have to pay more for their energy. To ensure we have a stable and affordable supply of energy here in the United States, the Biden Administration should support the domestic production of oil and natural gas, ensure the continued production on federal land, work with the industry on sensible and smart methane regulations, and stop calling for higher taxes on the American oil and gas industry. Stopping pipelines, slowing permitting, raising taxes, and increasing regulatory burdens will only drive-up costs, and hurt American jobs.”

According to the EIA’s figures, in early 2020, the U.S. was generating more than 12 million gallons of crude oil per day. When the pandemic hit and demand plummeted because few people were going anywhere — and thus using much less gasoline was being used — production dropped to about 9.7 million gallons of crude oil per day. By July 2020, it was back to 10.9 million gallons per day . . . but production has bounced around that level since mid 2020, hitting 11.1 million gallons in August, the most recent month of data available.

More than a few observers have pointed out the irony that a president who campaigned on pledges that “We are going to get rid of fossil fuels,” and “We’re going to phase out fossil fuels” is now calling on Saudi Arabia, Iran, Iraq, Venezuela, and the rest of OPEC to increase oil production. And unsurprisingly, OPEC likes high prices and is in no rush to bring them down, as the Wall Street Journal reported. In fact, they think prices might go significantly higher by next summer:

Foreign producers are also benefiting from rising prices and fearful of oversupplying the market, giving them little incentive to cooperate.

“We must keep the price. Iraq needs the money . . . for its stability,” Iraqi Foreign Minister Fuad Hussein said in an interview last week. He predicted oil might go as high as $120 a barrel by next summer, up from about $80 currently.

It’s not just OPEC; Wall Street analysts such as those at Bank of America think gas prices will be 45 percent higher than now by June 2022. That would calculate out to a nationwide average price of about $4.94 per gallon.

Of course, people don’t just use crude oil for their cars; home heating oil is another significant use. The EIA projects that “The 4 percent of U.S. households that heat primarily with heating oil will spend 43 percent more — 59 percent more in a colder winter and 30 percent more in a warmer winter.” But don’t think you’re off the hook if your home uses natural gas or propane:

“We expect that the nearly half of U.S. households that heat primarily with natural gas will spend 30 percent more than they spent last winter on average — 50 percent more if the winter is 10 percent colder-than-average and 22 percent more if the winter is 10 percent warmer-than-average.” The only homes not getting walloped by price hikes will be those using electricity for heat, but the EIA projects that even those homes will see a 4 to 15 percent price increase.

Bloomberg listed the policy options the president has for dealing with this problem:

  • “Biden could waive the Jones Act, which requires the use of American ships to move goods among U.S. ports, which would let companies move their oil around the country more easily, without being forced to rely on more expensive, U.S.-flagged, -crewed and -built tankers. But waivers would be vehemently opposed by U.S. shipbuilding interests and their allies on Capitol Hill, who had successfully persuaded the Trump administration to back off creating new exemptions to the law.”
  • The “administration is facing pressure to ease requirements for biofuel to be blended into diesel and gasoline. Experts disagree about the extent to which those Renewable Fuel Standard requirements affect gasoline prices, but refiners argue reductions would provide immediate help.”
  • “The administration could speed up the permitting of drilling projects and the sale of leases in Western states, where Biden paused auctions in January. The Interior Department is already set to sell drilling rights in the Gulf of Mexico later this month.”
  • “While leases sold today would takes years to produce oil, a rush of new auctions would have immediate signaling value to a market that has grown to expect the Biden administration will curtail oil and gas development as part of the president’s push to green the U.S. energy system. However, more leases don’t necessarily lead to more drilling.”

Biden is unlikely to waive the Jones Act, because the moment he does that, people will justifiably ask why the Jones Act is still in place for all the steps of the supply chain during the supply-chain crisis. And if Biden ever waived biofuel requirements or speeded up the permitting of drilling projects, his environmentalist allies would be mad enough to burn him at the stake — if not for all the carbon that would emit into the atmosphere. One of Biden’s first acts in office was to kill the Keystone XL pipeline; he adamantly believes you can suppress fossil-fuel production and not suffer any significant economic consequences. And now, ten months into a presidency that thought of oil and natural-gas production as if it was a planetary menace to be wiped out, Biden marvels, “Did you ever think you’d be paying this much for a gallon of gas?”

ADDENDUM: I ran across this recently; when Joe Rogan — a spectacularly skilled and attentive interviewer who defies everyone whose memory of him is his hosting people eating worms on the old NBC reality show Fear Factorinterviewed CNN chief medical correspondent Sanjay Gupta, most folks focused on Rogan’s understandable irritation at CNN’s inaccurate coverage of his bout with COVID-19. But Rogan and Gupta also discussed the lab-leak theory and the work of EcoHealth Alliance, and Gupta sounded . . . if not convinced of the lab leak, at least deeply suspicious:

“This gets back to the. same thing, I think, we’re dancing around a little bit, which is I don’t know, sometimes, what to do with this. It’s highly suspicious,” Gupta said. “I think of this and sometimes — the way I think about my teenage kids they’re not telling me everything here. Now, do I automatically assume they’re totally guilty of everything I think they’re guilty of, or is there something else going on here, you know?”

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