Over the past two years, I have written two articles on gasoline prices that each got more than half a million views at Forbes. That means there is obviously tremendous interest in the topic, but there is also a tremendous amount of misinformation circulating. It’s a subject that stirs great emotions in people.
I got a lot of feedback from readers on the previous article, Who Is To Blame For Rising Gasoline Prices? Today, I am going to address some of that feedback, and in the following article I am going to present a graphical representation of gasoline prices under the previous three presidents.
Regarding my previous article, one person wrote “I didn’t read your article, but I hope you eat your words.” I challenged him to actually read it, which he then did. Afterward he admitted that the points I made were accurate and that he had misunderstood what I was saying. Yes, that can happen when you don’t read the article.
To recap, my point wasn’t that President Biden’s policies will never impact gasoline prices. They may. My point is that the rise we have seen in gasoline prices in the two months he has been in office has absolutely nothing to do with Biden’s policies. We know why prices are rising. The price of oil has surged. We know why that has happened.
Some people asserted that cancellation of the Keystone XL pipeline permit had definitely caused gasoline prices to rise. Setting aside the fact that gasoline prices were rising well ahead of this announcement, I challenged people to explain cause and effect in this situation. Given all the global variables impacting oil prices — some of which are large and immediate — I asked for people to explain how canceling this project would cause a short-term impact on gasoline prices. Nobody was able to do this.
The Keystone XL pipeline project wouldn’t have been completed for years. It would have transported some crude oil from Canada and from the Bakken formation in the U.S. to refineries. Some crude oil from the pipeline may have reached the U.S. Gulf Coast for export.
Had the project been completed, the Keystone XL would have increased the capacity of the Keystone Pipeline by 510,000 barrels per day (BPD) to a total capacity of 1.1 million BPD.
For the record, I opposed cancellation of the permit. I explained the reasons in The Inherent Risks In President Biden’s Energy Plan. But my opposition aside, this does nothing to increase gasoline prices in the short-term.
True, a decade from now there might have been an additional 510,000 BPD of oil flowing to refineries through the Keystone XL. But OPEC regularly makes decisions on millions of BPD of oil with immediate consequences. Those have short-term impacts on oil prices, and subsequently gasoline prices. The loss of the Keystone XL volume may impact gasoline prices a decade from now.
But the Keystone XL volumes and the timeframe of the pipeline’s completion are tiny variables compared to OPEC production decisions and an economy recovering from the Covid-19 pandemic. U.S. oil production has fallen by more than 2 million BPD over the past year — a result of oil prices that crashed due to the pandemic. Demand is starting to rise, and that dynamic does have a short-term impact on gasoline prices.
If you believe that President Biden’s policies are hastening the end of the pandemic then you can put some of the “blame” on him. But I find that position is generally at odds with the belief that he is responsible for driving up gasoline prices.
One person wrote to me and asserted that gasoline prices are rising because President Biden is sending signals that he wants higher prices. First of all, that’s a misreading of the signals. He is trying to signal that we won’t need as much oil in the future as the world decarbonizes. In theory, that should lead to lower oil prices.
I disagree with this theory, as I explain in the article on Biden’s energy policies. But the signal he is sending isn’t that he wants high gasoline prices. And it wouldn’t matter if he did. Short term supply and demand issues move the oil markets, not a president’s wishes.
Finally, it was difficult to reconcile the opinions of people who 1). Bitterly complained about higher gasoline prices, while; 2). Simultaneously expressing support for the U.S. oil industry.
If you really believe that Biden is driving up oil prices, then that should be good for the U.S. oil industry. The oil industry was crushed last year as prices collapsed in the wake of the pandemic. As a consumer, you may have enjoyed last year’s low gasoline prices, but a prolonged period like that will result in lower U.S. oil production, and subsequently higher dependence on foreign countries for our oil needs.
So, pick your position: Either Biden is driving up gasoline prices, which helps the U.S. oil industry, or Biden’s policies have nothing to do with higher gasoline prices, and thus his policies are doing nothing to help the U.S. oil industry.