Gas prices surged to a new high despite White House efforts to stabilize them, as President Biden said Tuesday that tackling inflation is his top economic challenge.
Biden pledged to redouble his efforts, outlining his agenda — most of which is stalled in Congress — for easing the burden of inflation on average Americans. The plans include increasing taxes on the ultrawealthy, expanding the Affordable Care Act, and boosting investments in clean energy and transportation.
“I know families all across America are hurting because of inflation,” Biden said Tuesday in a speech at the White House complex. “I want every American to know that I am taking inflation very seriously.”
Biden, whose popularity has suffered amid the price pressures, tried to place blame for the nation’s economic challenges on Republicans, pointing to a plan released this year by Sen. Rick Scott (R-Fla.) for a minimum federal income tax. About half of Americans do not pay federal income taxes because they do not earn enough.
“My plan is to lower everyday costs for hard-working Americans and lower the deficit by asking corporations and the wealthiest Americans not to engage in price gouging and pay their fair share,” Biden said. He accused the GOP of pursuing an agenda that would instead raise taxes on working class voters.
“The bottom line is this: Americans have a choice right now between two paths reflecting two very different sets of values,” Biden said. “My plan attacks inflation and lowers the deficit. … The other path is the ultra MAGA plan.”
Biden’s remarks precede what is likely to be more tough news for the White House when the federal government reveals its newest inflation data midweek.
Inflation has soared in the past 12 months, with prices climbing at their fastest pace in 40 years. This has driven up the cost of gas, housing, groceries and a range of other items for millions of Americans. Wages are rising too, but price hikes are climbing much faster and eating into the disposable income of many Americans. This is putting pressure on households and businesses as they struggle to absorb new costs. Many businesses are passing these higher prices on to consumers, and the cost increases have been so disruptive that many families are rethinking their spending or retirement plans.
Nowhere is the pain more obvious than at the gas station. Tuesday’s prices are below what consumers were paying at the high-water mark in July 2008, when gas was $5.36 per gallon in today’s dollars, but the sting for consumers remains.
“The tools the federal government can use to influence prices are limited,” said Devin Gladden, manager for federal affairs at AAA National. “They are already using almost the whole toolbox.”
This month’s increase, Gladden said, is largely a response to the European Union’s announcement that, with a few exceptions, it aims to stop all imports of Russian oil by the end of the year in the wake of the invasion of Ukraine. The European move has a much bigger impact on world markets than any short-term measures the Biden administration can take to blunt high gas prices.
There will probably be a measure of relief in the coming days after crude oil prices fell early this week, but analysts warn it could be a long time before prices come down significantly. At the very least, it is likely to be a long, challenging summer for drivers.
“No one has any idea how long this war will last or how long and deep its global energy impact will be,” said Edward Chow, an energy security scholar at the Center for Strategic and International Studies who worked in the oil industry for decades. He said the reshuffling of the global oil export map could leave the United States facing the kind of prolonged, soaring prices it endured during the OPEC embargo of the early 1970s and the Iranian revolution that followed in that decade.
“It may well be bigger and longer lasting,” he said, adding of Russia, “You simply cannot take the country that was the world’s largest combined exporter of oil and gas off the board without major impact.”
Compounding the challenge for the United States is a pandemic during which demand dropped so low early on that at one point oil was trading for zero dollars a barrel. That, combined with market uncertainty as the United States and Europe race to transition from fossil fuels, gave oil companies little incentive to invest in costly new drilling infrastructure. Those kinds of things don’t ramp back up in days or weeks.
It is not just a matter of getting more crude oil flowing. The United States’ ability to refine oil has diminished as older, dirtier, less efficient facilities have been replaced with updated refining equipment, said Kevin Book, managing director at ClearView Energy Partners, a research firm. The nation’s refining capacity, he said, is considerably less than it was at its peak.
“It takes years to build new refineries, and years to expand existing ones,” Book said. “We will see more capacity in the world. Just not right here, right now.”
The other remedies that might help marginally right now are not very politically palatable. One of them, said Patrick De Haan, the head of petroleum analysis at the price-tracking service GasBuddy, is relaxing the environmental rules around gasoline in the summer months in major metropolitan areas. Suspending requirements that cleaner blends be used in these places, he said, could ease prices 20 to 40 cents per gallon.
“It is not a whole lot of relief, and it comes at the expense of cleaner air,” De Haan said.
A gas tax holiday is another fraught option. It takes away badly needed funding for roads and sends an artificial signal to consumers that prices are dropping and they can drive more, when the reality is the supply is still tight. Urging states to reduce speed limits could go a long way toward helping consumers save gas, De Haan said. But there is not a huge political appetite for that, either.
Steadily rising gas prices are just one element of the politically toxic economic reality Biden faces.
The Bureau of Labor Statistics is likely to deliver more bad news with its inflation report Wednesday. As economists and policymakers look for any evidence that inflation has peaked, such as potential cooling in the housing market, promising signs are few. Price growth has exceeded expectations for more than a year, with the nation stuck in an inflation spiral.
Overall prices had climbed 8.5 percent in March from March 2021, driven largely by higher energy costs linked to Russia’s invasion of Ukraine.
A White House that was largely dismissive at the onset of inflation pivoted after price hikes persisted and voter anger grew. One remedy was supposed to be the administration’s Build Back Better agenda, centered on a legislative package aimed at lowering household costs. That package is stalled in the Senate.
That leaves the White House pointing instead to more modest measures, including oil releases from the Strategic Petroleum Reserve. The White House also points to Biden’s action to extend a Trump-era freeze on student debt payments.
Scott’s tax proposals, coming at a time of economic pain for many Americans, has opened rifts within the GOP that Democrats plan to exploit. Senate Minority Leader Mitch McConnell (R-Ky.) denounced Scott’s plan but has refused to outline the GOP’s policy positions, arguing that voters will learn about them once Republicans retake Congress. Scott, the chairman of the National Republican Senatorial Committee, also released his 11-point plan for forcing Congress to have to re-approve every federal program after five years, a measure that would threaten entitlement programs such as Social Security and Medicare.
Scott responded on Tuesday by inviting Biden to debate him in Florida while also calling on the president to resign. He said: “Joe Biden can blame me all he wants. Here’s the truth: he’s the President of the United States, Democrats control the House of Representatives and the Senate. Democrats’ agenda is hurting American families and no amount of spin can change that.”
Biden on Tuesday also referenced the Federal Reserve, which plays a big role in attempting to combat inflation by raising interest rates. He called on the Senate to confirm several of his nominees to the central bank as soon as possible.
“While I will never interfere with the Fed’s judgments or tell them what to do,” Biden said, “I believe inflation is our top economic challenge right now and I think they do too. The Fed should do its job, and will do its job, with that in mind.”
Yet, the effectiveness of the Fed’s recent interest rate increases in curbing inflation remains to be seen as the Federal Reserve also tries to avoid pushing the economy into recession with its corrective steps.
Biden also said Tuesday that he is “looking at” the best way to reduce the tariffs on China imposed by President Donald Trump, but said no decision had been made. Biden administration officials have been locked in negotiations with the Chinese for months over easing the tariffs but so far have not announced a breakthrough.
Many economists have said lowering the trade barriers is among the best tools at the administration’s disposal for fighting inflation, but prior White House analyses have found that doing so would probably have only a minimal impact on price hikes.