How Presidents Influence Gas Prices

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Photo by Chris Yarzab.

The Democrats are nothing if not creative and nervy. They play the political game of influencing public opinion far better than Republicans. Even though their PR efforts are aided by a media that is overwhelmingly liberally biased, the Democrats are still way better at the “blame/influence” game than Republicans.

The Democrats’ latest gambit is to blame all the recent bad economic news on Russia’s invasion of Ukraine.

“High gasoline prices and inflation are Putin’s fault,” they squawk, secure in the knowledge that the NY Times, MSNBC and CNN will not contradict them, even though they all know it’s blatantly untrue.

Gasoline was $2.25/gallon when President Trump left office and it quickly rose to $3.50 in the first year of “President” Biden’s term. He was directly and unequivocally responsible for the rise from $2.25 to $3.50 as of February 14th, before Russia’s invasion of Ukraine.

Let’s review the factors that make up the retail price of gasoline.

The main price component of gasoline is the price of crude oil on the world market. There are four main elements to the cost of crude oil:

1. World supply and demand

2. Exploration — Are we looking for it? Are we actively exploring for it?

3. Oil Production/Extraction technology and capability (Thanks to horizontal drilling and the methodology to extract shale oil we’re the Saudi Arabia of the West. The president either encourages or discourages the development and deployment of new exploration technology depending on the regulations and fees the Fed government imposes.)

4. Geopolitical instability (sometimes amusingly called the “terror premium”)

The President can and does influence factors No 2. and No. 3 above.

The world oil market is a commodity market, subject to the same rules and influences as any other commodity market — the same as the pork belly or copper or citrus fruit market. If there’s a disastrous frost in Florida that kills half the orange crop, the market “knows” supply will be limited and prices increase. If the President stops oil exploration, the market similarly “knows” that future supply will be limited and prices rise. When Biden canceled the Keystone XL pipeline and rescinded new oil exploration leases on Federal property, it sent an unmistakable signal to the oil market that new, additional oil/gasoline supply would not be forthcoming from America and therefore oil (and gasoline) prices rose significantly. This was completely Biden’s doing. This is a huge factor in the rise in prices.

Likewise, when he canceled exploration in the potentially oil-rich Alaska National Wildlife Reserve area (ANWR is a tiny, postage-stamp-sized part of Alaska), it sent the same message to the world oil market: No significant new additional oil supply from America. The market responded like commodity markets always do: Prices go up. This was all Biden. It wasn’t Putin. This was a totally self-inflicted injury by Biden.

Crude oil is refined into gasoline. Once that happens, there are other factors that come into play. The first is our total refining capacity, our ability to turn all that crude oil into gasoline. Our refining capacity is at the limit. Our refineries are always operating right at the edge of their maximum capacity. So if there is an accident or maintenance/repair is needed, then the refinery is off-line, gasoline supply drops, and prices rise.

“Just build more refineries,” you say. This is far more difficult than the average person realizes. Refineries are expensive, complicated undertakings. You don’t just wave your hand and build a refinery. The EPA dictates refining regulations and they approve new refinery applications only after exhaustive environmental impact studies. However, the EPA is extremely reluctant to do so. We’ve built exactly one new refinery since 1977. The important thing to understand here is that the EPA is a federal bureau. The President has direct influence over their actions.

Another thing: there are several different gasolines for different parts of the country, intended to be used only in very specific regions. These different blends have different pollution/emission characteristics, so “California gasoline” burns differently than, say, “Arkansas gasoline.”

This leads to distribution inefficiencies. A local spot shortage in California can’t be relieved by sending Arkansas gasoline to California, because Arkansas gasoline is not allowed there. This is an antiquated notion. Today’s cars are so much cleaner-burning than in past years that the entire rationale for region-specific gasoline blends no longer exists. Again, this is the EPA, a federal agency under Biden’s control. With vehicles today having such effective catalytic converters to reduce emissions, do we need all those different gasolines? Has anyone looked into that? The President could order this be done tomorrow.

Related to the above is the “seasonal changeover” of gasoline. Cold weather and warm weather affect gasoline differently and vehicles spew forth more or less pollution based on the air temperature. There are “winter blends” and “summer blends” of gasoline that are intended to minimize these emissions. This is a vestige of the past. We don’t need that anymore. Modern cars have effective engine computers that automatically adjust the timing and fuel mixture for optimum running. Refineries shut down during the “seasonal changeover” so they can supply the correct type of gasoline for that time of year. This creates shortages and invites refinery mishaps during the changeover itself, all of which contributes to the price. Again, the President could tell the EPA to drop this antiquated requirement tomorrow.

For the foreseeable future, say 10-20 years at least, the world’s demand for oil will continue unabated. No middle-income plumber making $53,000/year who owns a 2011 Ford Fusion with 96,000 miles is going to go out and buy a $52,000 Tesla just because Biden tells him to. Those millions of petroleum-fuel car owners around the world are going to continue to drive their cars. So, oil demand continues.

The world uses around 100 million barrels a day. In its best days, America produced around 11 million barrels a day, but now we’ve given away our energy independence. If Biden forces America to curtail that total (or not grow it), then the rest of the oil-producing world will have to make up the difference in order to meet world demand. Where and who do you want producing the oil that we don’t produce ourselves? Saudi Arabia, with their anti-Israel stance? Iran, with their terrorist-funding activities? Venezuela, with their Communist, anti-humanitarian society? Nigeria, with their unsophisticated pollution-prone methods? Russia, so they can fund their expansionist wars? See what happens when we don’t produce what we should? The demand for oil doesn’t go away just because America’s oil production is forcibly reduced. That demand just gets fulfilled by terrorist, anti-Semitic, brutal dictatorships.

This is 100% under Biden’s control.

There is so much that is under our direct control that we have only ourselves to blame for our current gasoline pricing. When a war like Ukraine causes prices to rise, that’s the perfect time for another look at things like eliminating regional gasoline blends and announcing that we’ll build new refineries. Remove outdated EPA regulations. Restart Keystone. That will reduce prices and send a positive message to the world’s oil market. Keep up the exploration for new oil. Send the best possible American message to the market. We could have minimized any war-caused price increase. That’s what the president can and should do.

Steve Feinstein | Contributed

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