- Biden has few options to lower gas prices and avert political obliteration.
- He makes a big bet by beating up Exxon and traveling to Saudi Arabia next month.
- “MBS begging for oil will not lower gas prices,” California Rep. Ro Khanna said in an interview.
President Joe Biden is staring at political obliteration within months.
A surge in oil and gas prices threatens to inflict a decisive defeat on the Democrats in November’s midterms. The national average for a gallon of regular gasoline rose above $5 for the first time last weekend. It’s a 10 percent jump from a month ago, reflecting huge consumer demand that is outstripping available oil supply, coupled with severe aftershocks in energy markets from the war in Ukraine.
The bleak political outlook for the White House was compounded by an inflation report that came in worse than many economists had expected. It showed the prices of groceries, airline tickets and rent rising at the fastest pace in four decades. Biden has since doubled down on his promise to fight rising prices, making it a top priority domestically.
But the rise in gasoline prices underpins the current spiral of inflation. It burdens businesses with higher bills for electricity, air travel and shipping, and raises prices for Americans across the board. The White House seems to have few options left to reverse the supply crisis. It pledged to release one million barrels a day from the Strategic Petroleum Reserve back in May, relaxed regulations on ethanol fuels and sought to free up ports.
“President Biden is using basically every tool available,” Jonathan Elkind, a senior research scholar at Columbia University’s Center on Global Energy Policy, told Insider. “It seems to me that the Biden administration has done a lot of things that make sense.”
But those moves brought no relief at the pump, prompting Biden to make a big bet as gas prices soared with no end in sight. In a letter, he slammed Exxon and rebuked other big oil majors for reaping huge profits, signaling a more aggressive approach against a sector he’s urging to ramp up production quickly.
He is ready to meet Saudi Crown Prince Mohammad Bin Salman in July, despite vowing to turn Saudi Arabia into an international pariah over the assassination of Jamal Khashoggi, a prominent critic of the Saudi royal family and a US-based journalist .
It remains to be seen whether chasing after one bogeyman in the form of Big Oil and nestling with another in the form of a questionable ally will be enough to manipulate gas prices and keep Democrats from closing one or both houses of Congress this fall to lose.
Democrats are uncomfortable turning to Saudi Arabia for more oil
The possible image of Biden shaking hands with a Saudi leader allegedly masterminding the assassination of Khashoggi is enough to provoke unease and criticism from his Democratic allies.
Senator Tim Kaine of Virginia told Insider he thought the meeting was a “bad idea,” adding it was his “intuition” that the president’s trip should, at least in part, encourage Riyadh to increase oil production.
“MBS’ begging for oil isn’t going to lower gas prices,” California Representative Ro Khanna, a prominent House Progressive, told Insider. He added Biden should create preconditions such as urging the Saudi government to lift its devastating blockade of Yemen.
“I see very little evidence that the Saudis are going to cut gas prices,” Oregon Senator Ron Wyden said on Wednesday. “I see a lot of evidence of their appalling human rights abuses.”
Riyadh has very limited room to increase oil production — known as “reserve capacity” — and analysts say even if Saudi pumps more crude, it still might not dampen the rise in gas prices. “It’s not like flipping a switch,” Elkind said. “It’s not like that would affect things immediately.”
Some are urging the Biden administration to think outside the box. Skanda Amarnath, executive director of left-leaning think tank Employ America, argues the federal government should guarantee demand for oil producers in the short term and prioritize long-term clean energy initiatives, among other administrative maneuvers.
“It feels gross for Democrats to talk about doing things that are kind of pro-industry,” Amarnath told Insider. “But there are actually things, if you get them right, you’re going to prevent oil prices from crashing and have that boom-bust cycle again.”
“Nothing the President controls less than gas prices”
Experts say the White House is all but at the mercy of troubled global energy markets, which have been severely disrupted by the war in Ukraine. “There’s nothing the President controls less than gas prices, and nothing people want him to control more than gas prices,” Jason Furman, a former top economist in the Obama administration, told Insider.
Congressional Democrats are struggling to hold on to their thin majorities. Republicans are bashing Democrats as tax and spending liberals who exacerbated inflation and stalled domestic energy production with last year’s stimulus bill.
Some Democrats blame big oil companies for making huge profits at the expense of Americans being squeezed at the pump. Wyden will unveil a plan that would hit oil companies with a 21% surtax on profits deemed excessive and tax companies that buy back their shares.
“They’ve done so immensely well for Big Oil under the federal tax code at the expense of consumers,” Wyden told Insider, adding that he believes his action will “connect” people. Separate polls by the left-leaning Groundwork Collaborative and the Washington Post show that a majority of voters blame oil companies trying to cash in on the rise in gas prices.
“Profits are four times what they were before the war in Ukraine,” said Lindsay Owens, executive director of the Groundwork Collaborative, which did extensive research on the subject, in an interview. “Oil company executives are making huge profits and bragging about it to shareholders in earnings calls.”
Sens. Bernie Sanders of Vermont and Sheldon Whitehouse of Rhode Island also released their own windfall tax proposals. These are modeled on schemes recently introduced in Italy and the UK that provide checks to the poorest families.
The Biden administration has also kept the door open to a windfall profits tax. But some liberal and conservative economists have criticized windfall taxes as potentially inflationary and detrimental to efforts to increase crude oil production.
“Part of the Wyden plan would be passed on to consumers in the form of higher prices and would discourage production,” Furman said. “That’s not the right approach.”
“I think the fact that the Biden administration is imposing a windfall profits tax or saying they will consider it shows that they are in blame mode, not really constructive,” said Donald Schneider, deputy chief of US politics at Piper Sandler and a former Republican adviser to the House of Representatives told Insider.