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Biden set to go all-in with Big Oil on gas prices

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The administration’s efforts to keep pump prices low underscore how the cost of gasoline and electoral fortunes tend to be intertwined for the ruling party. They also illustrate how limited the political options are for the occupant of the White House.

A mix of factors beyond the government’s control are driving up fuel prices, analysts say. Among them are refinery outages in California and the Midwest, tougher European sanctions against Russia, persistent supply and demand imbalances, and OPEC’s recent decision to defy the White House and cut its oil production. So the White House opted for a long-term strategy of arm-twisting — publicly excoriating the oil companies while privately pressuring their leaders.

The offensive comes as the cost of gas has risen again across the country, erasing weeks of declines that President Joe Biden had championed as proof that his economic policies were working. While that trend has eased in the past few days, the longer-term picture looks grim, alarming officials who fear the fluctuating prices could do eleventh-hour damage to the Democrats’ medium-term chances.

“If you own it going up, you own it going down,” said Tobin Marcus, a former Biden adviser and current senior policy and policy strategist at Evercore ISI. “They’ve gotten great political mileage pointing to the clear improvements of the summer…and now have to make the most of a less than optimal situation.”

The average cost of gasoline now sits at $3.87 a gallon, about 20 cents higher than a month ago. In more than a dozen states, prices have topped the $4 mark, which Biden allies say is particularly troublesome for a Democratic party trying to sell voters on an improving economy.

Biden and his advisers have focused on the political significance of the cost of gas, saying it shapes what voters think about the economy. In the absence of immediate policy fixes, they turned fire on the industry, attacking the oil companies for collecting record profits and suggesting they could single-handedly drive down gasoline prices if not is for their own greed.

In late September, Biden directly urged oil and gas companies to cut prices, accusing them of profiting excessively from rising fuel costs, even as the global price of oil fell.

“Reduce the prices you charge at the pump to reflect the cost you pay for the product,” he said. “Do it now. Not a month from now. Do it now.”

More recently, Energy Secretary Jennifer Granholm pointed the finger at oil giant ExxonMobil after opposing administration demands that the industry limit overseas exports in favor of rising supply in the United States.

“These companies need to focus less on getting every dollar off the table and more on passing the savings on to their customers,” Granholm said, adding that ExxonMobil “misinterprets where we are.”

In a statement, White House spokesman Abdullah Hasan called the administration’s aggressiveness toward the industry “advance the interests of the American people – whether it’s asking the industry his ideas to increase oil and gas production, or to call on him to set up record wartime profit margins.

Top Biden officials — including National Economic Council Director Brian Deese and top State Department energy adviser Amos Hochstein — have been even more persistent privately, repeatedly pressing industry officials to find new solutions. new ways to bring prices down, people familiar with the talks said.

While the administration has always kept an open channel to industry, people familiar said conversations have become more direct and frequent of late – with officials increasingly confident companies could do more. .

This has sparked protests from the oil and gas industry that it can do little to move prices on its own, especially on the administration’s accelerated schedule. Energy market experts largely agree, noting that prices are affected by a range of global dynamics and companies cannot produce more oil on a whim.

“You can yell at them all you want,” said Ryan Kellogg, an economist and professor at the University of Chicago’s Harris School of Public Policy. “There’s no switch you can flip that’s going to immediately squeeze a lot more oil out of the ground.”

But Biden’s aides are undeterred. Public and private officials have complained that oil refiners have been slow to restart facilities, urging them to ramp up production as quickly as they shut it down when demand cratered early in the year. the pandemic. They also focused on how long it takes for lower oil prices to translate into cheaper gas for consumers, saying energy companies and retailers should reflect the savings when oil prices also drop. quickly that they raise prices when oil markets rise.

“We are still not at pre-pandemic levels. [of supply] and yet demand has almost gotten there,” said an Energy Department official involved in the talks, adding that the continued weakness in inventories represents the heart of the administration’s frustration. “We really need to understand what is holding the industry back.”

The more aggressive shift has produced little measurable progress of late, though an administration official said there has been some recovery in refinery restarts this year. But it has further aggravated an already frosty relationship between the administration and the oil industry. A senior industry official, who was granted anonymity to speak candidly from the White House, questioned Biden’s aides’ understanding of energy markets. The person summed up the intense focus on daily price fluctuations as the administration “asks the wrong questions and takes the wrong actions.”

Another industry official said that despite months of talks, Biden and the industry shared virtually no common ground on policies they said could lower fuel costs.

“We value open engagement with the administration,” said Frank Macchiarola, senior vice president for political, economic and regulatory affairs at the American Petroleum Institute. “But the administration needs to change its policies and end its price gouging rhetoric, which has been consistently denied.”

Still, the approach has pleased some Democrats who have long thought the White House should take a tougher line with the oil industry over its outsized profits — a tactic they say could also help deflect price frustration. gasoline that voters might otherwise train on Biden himself.

Several Democratic lawmakers, as well as California Governor Gavin Newsom, have called for a tax on so-called windfall profits that oil companies make from high prices.

representing Ro Khanna (D-Calif.), an early advocate of the windfall tax, told POLITICO he is currently working on a bill restricting refined gasoline exports after the Biden administration reported that she was open to the idea.

The White House has yet to fully enact a windfall tax or an export ban, both of which represent major interventions that experts and some officials say could backfire and drive prices up. destabilizing oil markets and the delicate geopolitical landscape. Aides fear, for example, that restricting exports could hurt European allies already facing high energy costs due to their sanctions on Russia.

Yet even if that doesn’t translate into new policy or lead to a measurable drop in gas prices, Democrats argue that keeping the pressure on the oil industry is worth the potential political payoff.

“They’re trying to keep it from being worse than it needs to be as a political issue between now and the midterms finish line,” Marcus said. “Political narratives work best when there’s an identifiable villain.”

Ben Lefebvre contributed to this report.