By David Blackmon
Gasoline prices at the pump are high and will most likely be going higher for the foreseeable future. AAA reported Friday that the average price for a gallon of regular unleaded gas was $3.83, the highest seen thus far in 2023, up from $3.53 on July 4. That’s an 8% increase during a time when the price for crude oil has jumped by 10%, indicating more running room for further increases in the price at the pump during August.
It is a simple fact that the price for gas in the United States follows crude prices up and down, which makes sense given that gasoline is derived from crude oil during the refining process. Gas prices are impacted by other factors, including transportation costs, EPA regulations requiring refiners to make dozens of region-specific summer blends to fight haze, and lack of domestic refining capacity.
But the price for crude is the single most consistent factor, and a consensus has formed among market analysts now that crude prices are likely to keep rising across the final five months of 2023. With Saudi Arabia and fellow OPEC+ member countries announcing this week they will extend their current export cuts through at least September, the currently under-supplied global market for crude seems destined to remain in that state for the remainder of the year.
The Biden Energy Department, led by Secretary Jennifer Granholm, appeared to react to this reality last week by cancelling a scheduled purchase of 6 million barrels of oil to kick off its long-delayed program to begin refilling the U.S. Strategic Petroleum Reserve. Granholm and her DOE subordinates have given lip service to complying with regulations that require the SPR volumes to be refilled in a timely manner all year long but have thus far failed to complete a single transaction. A spokesperson for DOE would not detail any specific reasons for the cancellation of the latest planned purchase, other than offering a vague rationale of “market conditions.”
Obviously, the “market condition” that most concerns this hyper-politicized administration is the prospect of rising gasoline prices and the negative impact they could have on President Biden’s shot at re-election in 2024. Most readers here will be aware that Mr. Biden chose to raid the SPR throughout most of 2022 in the run-up to the midterm elections, as polls showed Democrats losing support due to high gas prices at the pump. During a time of an expanding war in Europe and rising tensions with China, Biden and Granholm were perfectly content to draw down the nation’s insurance policy to less than half its capacity, low levels not seen since the early 1980s.
This constituted an illegitimate use of the SPR. Congress mandated the reserve in December, 1975 in response to the first Arab Oil Embargo and other international crises. The oil embargo caused U.S. drivers to first experience long lines to fill up their cars, doubled gas prices, and threw the national economy into a long period of what was called “stagflation.” The reserve exists as a tool to protect the country during times of war and other, real national emergencies.
Biden tried to couch last year’s move with claims that $4.00 per gallon gas prices constituted some sort of national emergency, but it was in fact a brazenly political tactic designed to help lower gas prices as an election approached. Gas prices did drop due to a variety of factors, a fact that may have enabled the Democrats to retain control of the U.S. senate. The problem, though, is the depleted state of the reserve leaves our nation more vulnerable to foreign aggression and leaves Biden and his political appointees in a situation in which further drawdowns of this geopolitical asset will be seen as even more nakedly political than before.
But with another election just around the corner and polls showing Biden at best in a dead heat with both Donald Trump and Ron DeSantis, who can doubt this administration would raid the reserve again if they think doing so would help win re-election? Get ready.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
