American politics scrambled by gasoline prices and strategic reserves

For Americans, difficult battles will be fought on the home front over oil and gas policies, as President Biden considers sanctions that could initially result in more economic pain at home. Biden will have to weigh policies with short-term economic rewards against long-term goals to fight climate change. His supporters who may disagree with some of his choices will most likely avoid an open rift to hang on to political power and pursue lasting climate initiatives.                                                                                                      The gasoline tax is the best example of the dilemma among Democrats. “Every $10 a barrel is 25 cents at the pump,” Book said. “Cutting an 18.4 cent tax to offset 25 cents or so can help, but the question is: How many more increases are we looking at? There are times and places where targeted tax cuts can give economic relief, but in this case the symbolic value may be more substantive.”                                                                Sens. Mark Kelly (D-Ariz.) and Maggie Hassan (D-N.H.) think there is more than symbolic value at stake. They co-sponsored legislation introduced Feb. 9 that would suspend the 18.4-cent per gallon federal gasoline tax until the beginning of 2023. Even before the Russian invasion of Ukraine, the price of gasoline had jumped 90 cents a gallon over the past year, according to the federal Energy Information Administration.                        Kelly, Hassan and Senate co-sponsors Raphael G. Warnock (D-Ga.) and Catherine Cortez Masto (D-Nev.) are all expecting tight races this fall, making the short term a priority.      But lower gasoline prices spur greater consumption, and the thirst for gas is already high. Last November, bouncing back from the coronavirus pandemic, Americans used 9 million barrels a day of gasoline, among the top 10 years ever for gasoline use. One of every 11 barrels worldwide went into the tank of an American automobile. Additionally, the federal gas taxes go to the Highway Trust Fund, and a shortfall would hurt efforts to rebuild and repair vital infrastructure. In the bill, Kelly would require the Treasury to make up for the shortfall, but that would increase the deficit.

Jason Furman, a Harvard University professor who was chairman of the Council on Economic Advisers in the Obama administration, said in an email that “a gas tax holiday suspension would be a bad idea: it would provide relatively little relief for consumers and would also provide a decent share of its benefits to oil producers. It would even be slightly helpful to Russia by putting some upward pressure on the global price of oil, albeit not a lot.”                                                                                                                    Instead, energy experts say, the president should focus on the long-term climate issue. That means helping Europe cut the link to Russian fuel supplies as soon as possible and strengthening renewable sources of energy.

“Expanding U.S. oil and gas production and infrastructure is a not a viable short-term fix,” he said, and it “would be in direct conflict with the imperative of reducing dependence on fossil fuels.”                                                                                                            Other Biden supporters have urged the president to slow down the issuance of permits for facilities that liquefy natural gas at minus-260 degrees Fahrenheit for shipment by special tankers to other countries. These supporters have charged that the export of liquefied natural gas (LNG) to other countries was boosting domestic prices.                                 In an interview in December, Bruce Nilles, executive director of Climate Imperative Foundation, said that exporting natural gas in a covid-plagued winter was “the antithesis of everything Biden’s said since taking office.” He said that “the ask of [Energy Secretary Jennifer] Granholm is: Can we please pause this? Now is not the time to be driving prices up.”

“We’ve seen the consequences of significant reliance throughout Europe on Russian natural gas,” said Frank Macchiarola, senior vice president of policy and regulatory affairs at the American Petroleum Institute. “But because U.S. supply has been there, Europe has been getting more natural gas from the United States than from Russia.”                            Nilles said in an interview Thursday that he still opposes an expansion of LNG facilities because of the time it takes to build a new one — doing little to deal with Europe’s urgent Russia problem or help it reach its climate targets.                                                        “It takes four years and exacerbates the other crisis facing Europe and the globe, which is climate change,” he said. “Let’s do everything we can as Americans to help Europe solve both.”

“This is exactly the situation it was designed for: a bully is trying to further intimidate us because he controls part of global oil production,” said Jay E. Hakes, administrator of the U.S. Energy Information Administration during the Clinton administration and for 13 years director of the Jimmy Carter Presidential Library.                                                    Furman said that oil prices, when adjusted for inflation, are lower than they were during the high period from 2011 through 2014. But he noted that they are still spiking. “I don’t think a SPR [Strategic Petroleum Reserve] release is economically critical at this point, but to the degree it acts as a bit of extra insurance against higher prices, it would be reasonable to do,” he said.