©Reuters. FILE PHOTO: US President Joe Biden discusses the US response to Russia’s invasion of Ukraine and warns CEOs about potential Russian cyberattacks at the Business Roundtable’s quarterly CEO meeting in Washington, DC, USA, March 21, 2022. REUT
By Jarrett Renshaw
WASHINGTON (Reuters) – U.S. President Joe Biden has few attractive policy options to rein in record U.S. gasoline prices ahead of the critical summer driving season, when millions of Americans fill up their tanks and hit the road. the holiday road
“The president and our national security team and our economic team are working overtime right now to assess and examine a variety of domestic options,” White House spokeswoman Jen Psaki said Tuesday.
Publicly, White House officials have said that all options are on the table. They haven’t spelled them all out, but they include a gas tax exemption or gas cards that would provide rebates to consumers; possible relaxation of the Jones Act, a law that requires domestic cargo to be transported in tankers made in the United States using union labor; and the lifting of sanctions on oil-producing nations.
Privately, officials say all of these options are politically complicated and few of them can actually lower gasoline prices much, according to two sources familiar with the administration’s thinking.
“They’re going through the menu and they can’t find anything they want to eat,” said Stephen Brown, a veteran oil lobbyist who consults with energy companies.
US bomb prices hit record highs last week following the Russian invasion of Ukraine. Retail gasoline prices are down from a record high of $4,331 hit on Friday but held at $4,237 a gallon on Wednesday, according to data from the American Automobile Association.
As fuel prices skyrocket around the world, Republicans in the US Congress blamed Biden’s energy policies. Many think the issue may boost their chances during the midterm elections in November.
Biden “is facing an angry electorate that sees the price of the bomb more often than the suffering of Ukrainians,” said Ed Hirs, an energy economist at the University of Houston.
Hirs said the policy options may help lower gasoline prices modestly, but they won’t do much about the real problem: surging crude prices, which remained around $120 a barrel even after retreating substantially from a high of about $139 a barrel on March 7.
The administration has urged energy companies to increase output from its current 11.6 million barrels a day, but analysts say it won’t be easy.
“The American public thinks that increasing (oil) production in the US is like FedEx (NYSE:) overnight delivery, but it’s more like diligence,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
An exemption from the federal gas tax would not lower prices much, but it would hurt funding for revenue-dependent infrastructure projects. A motorist who buys 10 gallons, which cost more than $40 at today’s prices, would save less than $2 if the federal gas tax were not applied.
The federal gas tax is just over 18 cents a gallon; most states impose a higher one. Pennsylvania is highest at 57.6 cents per gallon, followed by California at 53.3 cents. Several states, like Florida and Maryland, are moving to suspend their gas taxes.
Lawmakers have asked U.S. refinery officials to provide information about the gasoline tax exemption, according to numerous interviews, and the responses have not been encouraging.
“We’re telling them it’s not going to have a big impact on gasoline prices… to lower gasoline prices, you start with lowering oil prices,” said a senior US refiner official.
A bipartisan group of Farm Belt lawmakers has been pushing the White House to lift a summer ban on higher-ethanol gasoline blends, called E15, which are now cheaper than standard E10 fuel. But E15 is banned in the summer due to smog concerns, and White House climate officials oppose lifting the ban.
In addition, the refining industry is strongly opposed to boosting ethanol consumption, and the move would boost demand for corn at a time when high food prices are adding to inflation.
Asked about E15 gasoline, Psaki replied only that it was “in the options menu”.
Giving up the Jones Act could help move oil to refineries on the East and West coasts, but it could anger unions. Washington has taken the plunge temporarily during emergencies, such as when hackers shut down the largest fuel pipeline in the US.
“There is no way the White House is going to do this,” a refining source said. “There’s a history of lifting this during supply issues, that’s not the problem.”
The White House considered giving Americans gas cards to help offset high prices, but abandoned the plan for now due to opposition from lawmakers who questioned its effectiveness, according to a source familiar with the discussions.
Some worried that issuing gas cards would be cumbersome for the Internal Revenue Service and could delay tax filings. A senior administration official cited fraud concerns, noting that cards have been stolen from mailboxes.
“We are talking to Congress about all the ideas, they all have a good and a bad,” the official said.
This month, US officials met with Venezuelan President Nicolás Maduro for the first bilateral talks in years, and the lifting of sanctions was discussed.
But Venezuela’s opposition leaders are pressing Washington to condition any relaxation of oil sanctions on political concessions.
Separately, the United States and Iran have made progress on a nuclear deal that could add more oil to the tight market.
Republicans and others have criticized the negotiations with Venezuela and Iran, saying the White House is caving in to dictators.