As Gas Prices Rise, Biden Administration Warns Oil Companies

As pump prices trend higher across the country, the Biden administration is scrambling to shield Democrats from consumer frustration, blaming oil company opportunism and threatening new restrictions on the industry.

In public comments and private meetings with oil executives, administration officials warn that the White House could take extraordinary — and potentially economically risky — steps to cut costs if companies don’t act. more aggressive way to protect Americans from price spikes.

The renewed focus on the cost of fuel comes as gasoline prices have jumped in recent days by as much as 60 cents a gallon in some areas, posing a policy challenge for Democrats. A decline in prices that spanned 99 days has helped improve their prospects in next month’s midterm elections, in which control of Congress and several key governorates hangs in the balance.

But now prices are rebounding and the tools available to the administration to rein them in are limited. The most powerful political option the White House has the emergency power to limit exports to other countries, a strategy that would aim to increase inventories at home but could destabilize world markets and exacerbate the energy crisis. It would also be difficult to balance with the president’s commitment to keep as much oil as possible going to Europe.

“The 99-day streak is over, but there’s still a month to go before the election,” said Kevin Book, chief executive of ClearView Energy Partners, a research firm. “After this president took an unusually active role in telling American drivers that his administration will try to keep prices low, their rising creates a political danger.”

Price increases are significant in several pivotal states. In California, where there are at least eight hotly contested House seats, the average price of gasoline is $6.38 a gallon, up 62 cents from last week. Over the same period, it jumped nearly 40 cents in the swing state of Arizona, where polling averages reflect an extremely tight race for governor.

Gas prices could rise further ahead of midterm elections

Nevada, Washington, Oregon and Alaska have all seen prices jump at least 40 cents per gallon over the past week. In all swing states in the Midwest, the increase was less severe, but large enough that drivers felt the pain.

Prices are rising for a variety of reasons: a fire at a refinery in the Midwest, signals from the OPEC consortium that it plans to cut production significantly at its meeting this week, maintenance of facilities on the West Coast which pushed stocks to record highs. . An impending European ban on Russian oil, which will come into effect in December, is also pushing prices higher.

But oil companies are still posting eye-popping profits throughout these challenges, giving senior administration officials and their allies a chance to blame corporate greed as a key factor. They took every opportunity to do so.

After ExxonMobil penned a letter to the administration last week chafing at its pressure on oil companies to redirect some of their energy from exporting fuel around the world towards building stocks at home, Energy Secretary Jennifer Granholm released a scathing statement.

“This week’s letter from a company that made nearly $200 million in profits every day in the last quarter misinterprets where we stand,” she said on Friday. “These companies need to focus less on taking every dollar off the table and more on passing the savings on to their customers.”

Company officials did not respond to a request for comment. But the American Petroleum Institute and US fuel and petrochemical makers issued a statement accusing the administration of “contradictory energy policies and rhetoric.”

“The focus of this administration should not be on trapping product in the United States or diverting fuel from retail sales to storage, but rather on how to better produce and more affordably move American products in the United States,” the statement read. .

Complaints about the industry from the Biden administration have been relentless, including the president’s warning to oil companies last week not to indulge in price hikes in hurricane-ravaged regions of the South -East. Days earlier, Biden had reprimanded the companies during a meeting of the White House Competition Council. “Reduce the prices you charge at the pump to reflect the cost you pay for the product,” he said. “Do it now. Do it now. In less than a month, do it now.

Still, the administration has sent mixed signals about how aggressively it might intervene in oil markets. Although attacks on oil companies are politically popular, the use of emergency powers on them could backfire. Granholm said the administration isn’t currently considering forcing oil companies to limit their exports, but she’s also been clear that the option is definitely on the table.

It emerged as recently as Friday during a call Granholm and National Economic Council Director Brian Deese held with oil company executives. During the conversation, according to those involved, administration officials accused the industry to prioritize profits from selling oil abroad rather than protecting consumers from price spikes by restocking at home.

The Biden administration has taken an unusually active role in the gas price debate, an issue that presidents have typically shied away from in the past because prices are largely driven by market factors beyond their control.

“The tools available to them are quite limited,” said Mark Finley, an energy researcher at the Baker Institute for Public Policy at Rice University in Texas. Oil and gasoline prices, he said, are determined by the global market, and interference in that market can cause other countries to do the same, further tightening supplies and causing a price increase.

Finley also noted that the same oil companies that make big profits now suffered huge losses a few years ago. Penalizing them in boom times, he said, would likely erode the investments they make to secure energy supplies.

There’s also another concern with some of the interventions the administration is threatening, said Ben Cahill, senior fellow at the Center for Strategic and International Studies: It could quickly drive up oil prices. Forcing companies to replenish stocks of refined gasoline and diesel, he said, would reduce the fuel available on the world market, driving up prices for U.S. consumers who rely on imported oil and gas.

“I think that decision would backfire on us,” Cahill said. “This could lead to shortages in the global market and drive up prices on the East Coast and elsewhere in the United States”

Yet the nuances of the oil economy are hardly at the center of this heated political debate. Biden is just one of many Democrats to lash out at the oil industry as pump prices rise and the election nears.

“Oil companies are ripping you off,” California Gov. Gavin Newsom (D) said in a video address to voters on Friday, during which he called for a one-time tax on their earnings. “Their record profits come at your expense at the pumps.”


Washington

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