Can President Biden do anything to lower gasoline prices?
As Americans face the Thanksgiving holiday with the highest gas prices in seven years, calls are growing for the Biden administration to do something — anything — to lower prices at the pump.
Amid growing public frustration with high fuel costs, President Joe Biden has alternately cajoled and threatened oil producers in hopes of boosting supplies. He also moved to unclog U.S. ports and has suggested he may tap the nation's Strategic Petroleum Reserve. Such jawboning can be effective: it's a tactic that former President Donald Trump often resorted to when gas prices rose. And with rising prices eroding Mr. Biden's approval ratings, it's natural that the administration would want to be seen as doing everything possible to keep costs down.
But what can Mr. Biden do besides publicly push for lower gas prices? The following are a few options that have been suggested.
Waiving environmental requirements
Federal law requires that gasoline contain a certain portion of biofuel to lower their greenhouse gas emissions. Sometimes, however, presidents overrule that law to ease high gas prices. Bloomberg reported last week that Mr. Biden could waive renewable fuel requirements, under which refiners either blend biofuels such as ethanol into gasoline or buy credits to cover their obligations.
Suspending these clean-fuel obligations would save refiners money. The cost of these credits has swung wildly this year and is near record highs; ethanol is also near a multiyear peak.
But the benefit for drivers would be small, amounting to "pennies, not dollars," Benjamin Salisbury, analyst at Height Capital Markets, told Bloomberg.
Banning oil exports
Some have called for Biden to ban U.S. oil exports, leaving more oil for domestic consumption — a move that Energy Secretary Jennifer Granholm said last month was one option open to the administration.
But according to IHS Markit, clamping down on exports now wouldn't lower prices at the pump — and could even be counterproductive. The price of gasoline is largely determined by the global oil market, not the price of domestically produced crude oil, the analysts noted. What's more, the type of crude the U.S. exports is different from the one American refineries are set up to process.
"Without the ability to export U.S. crude, you enter a situation where there is a tighter global oil market or U.S. refineries are inefficiently processing types of crude that they are not configured for, or both," said Kurt Barrow, and IHS Markit analyst, in a press statement. "This would lead to supply chain and processing inefficiencies and possibly even higher gasoline prices."
Unblocking ports
The White House is trying to relieve congestion at U.S. ports, including expanding capacity at the Port of Savannah and letting the Port of Los Angeles operate 24/7.
That could smooth the movement of imported oil, but only if it's combined with other supply-chain interventions, said Scott Fisher, senior vice president of policy and public affairs at the Texas Food and Fuel Association.
"Is there a fix? Certainly. Is it immediate? I don't know," he said, noting that the nationwide shortage of truckers could impede any effort to expedite oil deliveries around the country.
"The ports, however many hours they're operating a day … if it's not moving off the docks, it's not going to help you," he said.
Calling in the investigators
Last week, Mr. Biden called on the Federal Trade Commission to investigate anticompetitive behavior by oil companies, pointing out that extraction and refining companies' costs are declining while prices are the pump are rising.
"In the last month, the price of unfinished gasoline is down more than 5 percent while gas prices at the pump are up 3 percent in that same period," Biden wrote, noting that extraction companies' profits this year are set to double from 2019.
Former presidents Barack Obama and George W. Bush have also turned to the FTC when faced with high gas prices. And it's true that margins on retail gas sales have increased over the long term. Between 2000 and 2014, the last year the U.S. saw sustained high gas prices, the retail cost for a gallon of gas was 64 cents above its wholesale price, Benjamin Salisbury of Height Capital Markets said in a research note. In August of this year, that margin rose to 91 cents.
However, these growing margins could be caused by many factors, including local supply-chain issues, "fuel taxes, environmental and renewable compliance costs, station closure, retail consolidation, COVID disruption shakeout [or] demographic and geographic shift," Salisbury wrote.
It's worth noting that the oil industry has a history of acting in ways that harm competition, wrote John Kemp, an energy analyst for Reuters. "There may be a case for the FTC and the U.S. Department of Justice to investigate elements of the oil and gas industry for anti-competitive behavior," Kemp said in a column, while adding that Biden's letter fell short of the mark.
Tapping the country's gasoline "bank"
Opening up the Strategic Petroleum Reserve — a large supply of oil stored in facilities along the Texas and Louisiana Gulf coasts that the U.S. keeps on hand for emergencies — is another tool the administration has hinted it's willing to use. Of all the possible actions the White House could take, this is the most likely, analysts told CBS MoneyWatch.
The SPR is a sort of emergency fund for gasoline, intended to be tapped only when supplies of oil are disrupted, such as after natural disasters. Although using it as a way to tame prices would be unprecedented, it would effectively lower prices in the short term.
"The devil would be in the details," said Patrick DeHaan, head of petroleum analysis at GasBuddy. "The president, if he goes ahead with his aligned release, has to make sure it's enough to move the needle but not so much as to deplete the SPR."
Once the release of oil from the reserve was announced, consumers would have to wait between three and five days for gas stations to start lowering their prices, and up to three weeks for the full price drop to be reflected at the pump.
It takes time for filling stations to lower their prices. Even when the cost of new fuel drops, a retailer still has thousands of gallons of gas, previously bought at higher prices, that they need to move, DeHaan explained.
"The first stations to get a competitive edge would maybe lower their prices a penny or two to get an edge on the competition," he said. "Stations would do that every day, depending on competition, and they'll do that for one to three weeks. By three weeks they've passed on the full decrease."
The good news for consumers is that prices at the pump could soon drop even if the White House doesn't raid the SPR. The price of crude oil on Friday fell 3% to about $76 a barrel. If that level holds, national gas prices would likely drop by 15 cents to 30 cents in the next weeks, DeHaan said.
Still, he added, "oil is going to be volatile, and that drop may not get passed along."