Whether gas prices are up or down, don’t blame or thank the president
Prices at the pump are falling, which is welcome news for Democrats this election season.
And a few weeks ago prices were rising, which was bad news for Democrats.
But no matter which way prices are going — and which way they go next — the cost of fuel simply doesn’t have much to do with who is in office.
The government does have some limited levers to try to adjust prices. President Joe Biden’s announcement of a massive release of oil from the strategic petroleum reserve earlier this year did move markets — temporarily.
But overwhelmingly, prices are set by the laws of supply and demand. Here’s what you need to know.
What’s driving prices down right now?
Two main forces are sending prices down.
One is an improving refinery situation. Last month, outages at refineries, particularly in the West and the Great Lakes area, sent prices in some regions skyrocketing.
“We were seeing, every day, gas prices increase by 10, 15, sometimes 20 cents a gallon,” remembered Anlleyn Venegas, a San Diego-based AAA spokeswoman.
Now refineries are coming back online and the supply of gasoline is going up which, in turn, is pushing prices down.
Meanwhile, autumn has arrived. That means, like clockwork, pumpkin spice has taken over the grocery aisle, colorful leaves have taken over Instagram — and demand for gasoline has started to decrease. Americans drive less when it’s colder, and gas prices almost always go down this time of year.
Add those together, and you get prices dropping every day since Oct. 11.
What about Biden’s recent announcement of another release from the Strategic Petroleum Reserves?
That announcement was more of an update about the big release announced this spring; no new barrels of oil were involved.
“It wasn’t a new announcement,” says Patrick De Haan, of the price tracking app Gasbuddy. “The market had been expecting that … it’s really not moving the needle much.”
The White House has certainly been trying to move prices down. In addition to that update on the SPR release, it also pledged to refill the strategic reserves if prices fall, an attempt to incentivize domestic oil producers to pump more oil by giving them a guaranteed buyer.
Earlier, it attempted to practice oil diplomacy and coax Saudi Arabia into boosting production. But the Saudis and their allies did the opposite with a major production cut earlier this month.
The Biden administration also excoriated oil companies for not keeping enough oil in inventory, and threatened export bans. (The industry warns such bans would backfire badly.)
None of those efforts can really be credited for today’s falling prices.
This is a longstanding frustration for whoever is in the White House; while politicians are held responsible for gasoline prices, they have very limited tools for actually affecting those prices, and the tools they do have don’t work super well.
What about the climate policy that the White House has set? Has that played a role in pushing prices up?
The White House says we need more oil in the short term, to meet energy needs, but less oil in the long term, to reduce the catastrophic impacts of climate change. Oil executives do not like that message, and say it makes it harder to plan investments.
However, as the White House takes pains to note, current federal policy is not blocking production. There’s no drilling ban in place.
So why is U.S. production lower than it might be? There’s a tug-of-war going on, between incentives to drill more oil and incentives to drill less. On the “more oil” side you have the profit a company can make on each new barrel it drills. On the “less oil” side, you have supply chain problems, labor shortages, investors who are enjoying high oil prices, and fears of a global recession, as well as the potential impact of long-term climate policies.
Could the government do more to set energy prices?
Some governments around the world simply own oil production within their borders outright and set fuel prices for their citizens regardless of market prices. Think of Venezuela, or Iran. The U.S. economy is, intentionally, set up very differently.
However, in Europe — in many countries with economies much more like the U.S. — governments are currently discussing some fairly unprecedented interventions into energy markets. The war in Ukraine has sent natural gas prices haywire. Politicians are deeply concerned about the availability and cost of heating, electricity and fuel. And they’re looking at windfall taxes to claw back profits from energy companies, and rebates and price caps to cut costs for consumers. These proposals are attempts to more directly influence the prices consumers pay for energy in Europe.
It’s far too soon to say whether those interventions will work out. Right now, though, similar proposals have not gained traction in Washington, D.C.