You may have muttered “Biden” under your breath the last time you filled up your car at the gas pump, blaming the president for increasing gasoline prices. That’s perfectly understandable — who doesn’t want someone to blame when they have to pay $45 to top off their Ford Escape? Still, the reality is that President Joe Biden’s policies have had limited effect on prices at the pump. Biden’s energy plan will certainly affect prices down the road, but in the meantime, you can blame the laws of supply and demand.
As people usher in spring and the ease of COVID-19 restrictions, they’re also seeing an upward trend in gas prices. The average price for regular gasoline in the United States recently reached $2.85 per gallon, up nearly 70 cents per gallon since January. Naturally, many started playing the blame game, pointing fingers at the 2-month-old administration. While blaming Biden is easy, the president has a limited ability to change gas prices immediately. Gas prices began to increase in November 2020, before the Biden presidency even began. This trend is the result of several factors, including rising crude oil prices, increased demand, and constrained refining capacity.
If Biden isn’t to blame for paying more at the pump, then who is? For starters, turn to OPEC-plus, the oil cartel consisting of the Saudi Arabia-led Organization of the Petroleum Exporting Countries and a group of non-OPEC producers led by Russia. One of the biggest drivers of gasoline prices is the price of oil — something OPEC-plus significantly influences by controlling the amount of oil on the global market.
Oil demand and prices plummeted last year during the COVID-19 pandemic, and OPEC-plus has struggled to predict the impact of the virus on global oil demand. In response to falling demand, the oil producing countries cut production in 2020 to the lowest levels since the Gulf War in 1991.
Many expected OPEC-plus to ramp up output this year in response to the global economic resurgence and increased demand. Instead, they announced in early March that production cuts would remain in place until at least April, with the small exception of Russia and Kazakhstan collectively increasing production by 150,000 barrels per day. The price of oil reflected the announcement when international benchmark Brent crude reached $70 a barrel in mid-March, the highest oil prices in more than a year.
Global demand also affects the price of oil. Demand plunged last year, but it is now rising as many leaders have eased crippling COVID-19 restrictions and more people are vaccinated, allowing businesses to reopen, workers to commute to their offices, people to travel, and a sense of normalcy to return. Supply cannot respond as quickly as demand, putting pressure on prices.
Refinery capacity also drives prices. High prices reflect disruption in refinery capacity, such as when the winter storm ripped through Texas in February, forcing many refineries offline. Before the Texas storm, U.S. refinery utilization was at 83.1%; it fell to 56% by February 26. Refinery utilization reached 76.1% as of March 12, signaling a slow recovery. But again, it’ll take time for prices to catch up.
Another factor driving up prices is the switch from winter-blend to summer-blend gasoline. Federal environmental regulations require refineries to produce a different fuel blend in the summer when demand is highest. Summer-blend fuel contributes less emissions than winter-blend but is more expensive to produce and yields less gasoline per barrel of oil. High-quality summer-blend gas can cost up to 15 cents more per gallon than winter-blend fuels, according to NACS.
Environmental regulations such as those requiring less polluting gasoline in the summer are good examples of how an administration’s policies can affect the long-term price of gasoline. But so far, Biden has not implemented any such regulations. He canceled the Keystone XL pipeline extension and paused new oil and natural gas leases on federal lands — two policies frequently cited for fuel price hikes — but that did little to affect prices. Canadian oil that would have been transported via the Keystone Xl extension will likely find its way to the market via railcar and existing pipeline networks.
And the moratorium on new oil and gas leases on federal lands was mainly for show. According to the Department of Interior, the oil and gas industry has “stockpiled millions of acres of leases” and is “sitting on approximately 7,700 unused, approved permits to drill.” The temporary ban did nothing to affect the immediate supply of oil or gas in the United States, though it may have a long-term impact if extended.
So what can a president do to affect gas prices in the short-term? The president can release oil from the Strategic Petroleum Reserves, thereby increasing supply and temporarily driving prices down. The president could drive up the price of gas by signing legislation increasing the federal gasoline tax, but that would also take the will of Congress.
Biden may implement costly regulations in the future, but for now, when you find yourself cursing at the pump, blame supply and demand.
Nickie Deahl is a Young Voices contributor and a legislative intern at the National Security Commission on Artificial Intelligence. Her views are her own and do not reflect her employer’s. Find her on Twitter @NickieDeahl.
