“As millions of Americans travel this holiday weekend, they are feeling the cost of Biden’s policies at the pump. Gas prices are at their highest level in 7 years.”
— Sen. John Barrasso (R-Wyo.), in a Fox News opinion article, July 2
“Average gas price: June 2020: $2.21 June 2021: $3.07 President Biden’s economy!”
— Rep. Jim Jordan (R-Ohio), in a tweet, June 21
It’s that time of year again: Gasoline prices have spiked, and politicians are trying to make political hay.
The Fact Checker has had to deal with this faux issue for decades. We wrote about it in 1996 when then-Sen. Bob Dole campaigned for president and urged a repeal of the 4.3 cent gasoline tax because gasoline then was on track to reach $1.31 a gallon. We wrote about it in 2000 when gas prices appeared to have popped to the highest level ever. We wrote about it in 2012 when Republicans misleadingly complained that gasoline prices had doubled in President Barack Obama’s term.
And here we are again. President Biden has been president for only six months, and somehow his policies have already led to high gasoline prices.
That’s not how it works, folks. Let’s explain what’s going on.
So far this year, gasoline prices have risen 88 cents, or a 40 percent increase, to $3.13 a gallon on July 6. That’s not chump change. Mark Finley, a fellow at Rice University’s Center for Energy Studies, estimated that increase translates into extra costs of $120 billion for U.S. consumers on an annualized basis.
The biggest factor in the price of gasoline is crude oil. Well over 50 percent of the price at the pump is directly tied to the cost of crude oil. About 18 percent of the cost relates to state and federal taxes — the latter of which have not increased under Biden. About 15 percent stems from distribution and marketing, while 13 percent comes from refining costs and profits. (These figures are from AAA.)
If you go back over 35 years of Energy Department data, there is almost a perfect — 95 percent — correlation between yearly crude prices and gasoline prices, Finley said.
So why has the cost of crude oil increased in recent months? It was unusually low because the coronavirus pandemic flattened economies around the world. Now that mass vaccination is helping to reopen many economies, demand is increasing again. But supply is lacking.
“Oil demand was so low during the pandemic last year, oil producers decreased their production levels,” said Chris Higginbotham, a spokesman for the Energy Information Administration (EIA). “It takes time to ramp up production, so demand this year has increased far more quickly than production rates. That means there is less crude oil in storage, which pushes up the price of oil, making it more expensive to make gasoline.”
“Crude prices are influenced by a number of factors — geopolitical tensions/decisions, production, demand, supply, etc.,” Jeanette McGee, a AAA spokeswoman, said in an email. “Right now the largest influences are increasing global demand, promise of leisure travel, optimism of vaccination rollout and OPEC+ failure to reach an agreement on production increases.”
Trilby Lundberg, publisher of the Lundberg Survey of U.S. fuel markets and the acknowledged guru of gasoline prices, agreed that the overwhelming reason for higher gasoline prices is higher crude oil prices. “One year ago, the U.S. average retail price of regular grade gasoline was 97.45 cents lower than it is now; crude oil (using example of near-month futures price of West Texas Intermediate) was lower by approximately 81 cents a gallon, leaving about 16 cents a gallon difference,” she wrote in an email. “Then, removing just over 2 cents per gallon from that difference due to various individual states having increased gasoline tax, the result: Retail gasoline is up only about 14 cents a gallon more than is crude oil.”
Higginbotham said that decreased demand during the pandemic has “also hurt our ability to refine crude oil to make gasoline and other petroleum products.”
He added that there were two other unique factors this year. “Texas’ extreme weather led to refinery shutdowns that contributed to tightness in the gasoline market just as pandemic-related restrictions were starting to ease,” he said. The Colonial Pipeline shutdown from a ransomware attack “happened just before summer driving season officially kicked off, so gasoline supplies got even tighter just as demand was really ramping up.”
Finally, during the summer, the gasoline blend (which is less likely to evaporate in the heat) costs slightly more to produce than the winter blend. That shift adds a few pennies to the cost.
The EIA, in a forecast released last week, believes crude prices will decline as oil production increases. It projects U.S. regular-grade gasoline prices to average $2.92 per gallon in the rest of this year and $2.74 per gallon for all of 2022. It’s worth noting that when adjusted for inflation, these prices are well within the band of prices since 2004 — and these projections are slightly above and then slightly below the average inflation-adjusted gasoline price since 1918 ($2.86 as of 2020).
So where’s Biden in all of this? Nowhere. As AAA’s McGee put it, “Gas prices fluctuate no matter who is in office.”
Media representatives for the Republicans quoted above defended their statements by arguing that some of Biden’s actions, such as canceling the unbuilt Keystone XL pipeline and imposing a moratorium on new federal leases for oil and gas production, have the potential to affect prices.
“The administration’s hostility to fossil fuels and its inflationary policies have contributed to the energy price increases we’ve seen,” said Mike Danylak, communications director for the Senate Energy and Natural Resources Committee, on which Barrasso is the senior Republican. He cited a Wall Street Journal editorial that stated there is no link between ending Keystone and higher gasoline prices, but that Biden’s actions could limit U.S. production, reducing global supply even as demand surges — and give more pricing leverage to overseas oil producers. Similar points were made by Russell M. Dye, communications director and counsel at the House Judiciary Committee, where Jordan is the senior Republican.
The Pinocchio Test
These attacks holding Biden’s policies responsible for higher gas prices are silly and false. Gasoline prices are closely connected to crude oil prices — and a president has virtually no control over that. The world is emerging from a pandemic that sent oil prices tumbling. Now the price of crude oil is going up. Simple as that.
Biden has taken some actions that, in theory, could affect energy prices in the future and on the margins — but he’s been president for only six months. Any possible impact will happen far down the road — and that will be a subject for historians, not politicians.
In the immediate period, pinning the blame on Biden for today’s gasoline prices is worthy of Four Pinocchios.
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