The renewed attention on the cost of fuel comes as gas prices have jumped in recent days by as much as 60 cents per gallon in some regions, posing a political challenge for Democrats. A decline in prices that stretched for 99 days helped to improve their prospects in next month’s midterm elections, during which control of Congress and several key governorships is at stake.
But now prices are rebounding, and the tools the administration has for curbing them are limited. The most potent policy option the White House has is emergency authority to limit exports to other nations, a strategy that would be targeted at boosting inventories at home but which could destabilize global markets and exacerbate the energy crunch. It would also be tricky to balance with the president’s commitment to keep as much oil flowing to Europe as possible.
“The 99-day streak is over, but it is still a month before the election,” said Kevin Book, managing director at ClearView Energy Partners, a research firm. “After this president has taken an unusually active role in telling American drivers his administration is going to try to keep prices low, the fact that they are rising creates political jeopardy.”
The price hikes are substantial in several pivotal states. In California, where there are at least eight hotly contested House seats, the average price of gas is $6.38 per gallon, an increase of 62 cents in the past week. During the same period, it jumped nearly 40 cents in the swing state of Arizona, where polling averages reflect an extremely tight race for governor.
Nevada, Washington, Oregon and Alaska have all seen prices jump by at least 40 cents per gallon in the past week. Throughout the swing states of the Midwest, the increase has been less severe, but large enough for drivers to feel the pain.
The prices are going up for a variety of reasons: a refinery fire in the Midwest, signals from the OPEC consortium that it plans to cut production significantly when it meets this week, facility maintenance on the West Coast that has pushed inventories down to record lows. A looming European ban on Russian oil, to take effect in December, is also pushing prices up.
But oil companies are still posting eye-popping profits throughout these challenges, giving an opening for top administration officials and their allies to charge that corporate greed is a key factor. They have taken every opportunity to do so.
After ExxonMobil wrote a letter to the administration last week chafing at the pressure it is applying on oil companies to redirect some of their energy from exporting fuel around the world to shoring up inventories at home, Energy Secretary Jennifer Granholm issued a blistering statement.
“This week’s letter from a company that made nearly $200 million in profit every single day last quarter misreads the moment we are in,” she said on Friday. “These companies need to focus less on taking every last dollar off the table, and more on passing through savings to their customers.”
Company officials did not respond to a request for comment. But the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers 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 away from retail sales and into storage, but rather, on how to better produce and more affordably move U.S. product within the United States,” the statement said.
The complaints about the industry from the Biden administration have been relentless, including the president’s warning to oil companies last week not to engage in price gouging in hurricane-ravaged areas of the Southeast. Days before that, Biden scolded the companies at a meeting of the White House Competition Council. “Bring down the prices you’re charging at the pump to reflect the cost you pay for the product,” he said. “Do it now. Do it now. Not a month from now — do it now.”
Yet the administration has sent mixed signals over how aggressively it may intervene in oil markets. While attacking oil companies is politically popular, using emergency powers over them could backfire. Granholm has said the administration has no plans at the moment to force oil companies to curb their exports, but she has also been clear the option is very much on the table.
It came up 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 people involved, administration officials accused the industry of prioritizing profits from the sale of oil abroad over sheltering consumers from price spikes by rebuilding inventories at home.
The Biden administration has taken an uncommonly active role in the gas price debate, an issue presidents have generally distanced themselves from in the past because prices are largely guided by market factors out of their control.
“The tools at their disposal are pretty limited,” said Mark Finley, an energy fellow at the Baker Institute for Public Policy at Rice University in Texas. Oil and gasoline prices, he said, are driven by the global market, and interfering in that market can lead other nations to do the same, tightening supplies further and causing prices to go up.
Finley also noted that the same oil companies that are making big profits now suffered considerable losses a couple of years ago. Penalizing them in boom times, he said, would likely erode the investments they make in securing the energy supply.
There is also another concern with some of the intervention the administration is threatening, said Ben Cahill, a senior fellow at the Center for Strategic and International Studies: it could quickly drive oil prices up. Forcing companies to replenish inventories of refined gasoline and diesel, he said, would lower available fuel on the global marketplace, pushing prices up for American consumers who rely on imported oil and gas.
“I think the move would backfire,” Cahill said. “It could lead to shortages on the global market and drive prices higher on the East Coast and elsewhere in the U.S.”
Yet the nuances of oil economics are hardly front and center in this heated political debate. Biden is just one of many Democrats unleashing on the oil industry as prices at the pump go up 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 windfall tax on their earnings. “Their record profits are coming at your expense at the pump.”
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