In this era of rising prices, nothing has felt more inflation-y than gas. If you own one of the United States’ 279 million gas-powered passenger vehicles, you know that fuel prices have been bloated for a while, with no relief in sight. On Friday, AAA blared that the nationwide average gas price reached a new record of $4.99 per gallon; some states’ averages have already crossed the $5 threshold, while California is seeing a $6.40 average. On Friday, the Consumer Price Index hit 8.6 percent, spurred in part by energy costs.
Strictly speaking, these are not records. When adjusted for inflation, the July 2008 peak of $4.11 would equate to $5.40 in today’s dollars. And these shocks are global: The fallout from the Russia-Ukraine conflict has worsened energy and commodity costs all over, hitting major countries like the United Kingdom, India, and Spain in significant measure. It’s as true now as it was when I wrote in March that this isn’t President Joe Biden’s fault. In fact, in response to both the high inflation and low approval, his administration has tapped the Strategic Petroleum Reserve, increased domestic drilling efforts, and permitted the sale of a controversial biofuel, none of which has helped dampen prices. Is there anything he—or anyone else—can actually do?
There might be. Let’s look at a few options.
Hit the Oil Companies
If you tuned into an investor call or two back in March, you’d have heard oil giants’ glee at the price spikes—and also, their unwillingness to do anything about it. CEOs of major corporations like Pioneer and Occidental explicitly stated their intention to buy back stocks to return funds to shareholders, instead of retooling their business.
The House of Representatives passed a bill last month to crack down on alleged price-gouging by energy companies, following reports of persistent record profits for companies like Exxon Mobil and Shell as they continue to only slowly boost oil supplies. A windfall tax on exorbitant revenues, which would provide funding to offer rebates to lower-income consumers, has also been proposed by congressional Democrats. Whether either of these measures will pass, however, remains to be seen.
Suck Up to OPEC
Another factor behind the oil shock is, of course, the self-imposed restrictions from oil-heavy nations. Biden is planning a trip this month to Saudi Arabia with an ask for its leaders—who have so far ignored his calls—to push extra production and stabilize the volatile oil markets. OPEC+, the group of oil-producing countries headed by Saudi Arabia, has agreed to boost barrel output later this summer, though Biden is still planning on visiting more of them (like Egypt and the United Arab Emirates) to see if they can do more, and faster. He’s also considering easing sanctions on Iran and Venezuela, which have more room to increase production. Obviously, courting petrostate dictatorships, including one that Biden had wanted to make a “pariah,” isn’t ideal. Neither is Biden’s polling.
Go Station to Station
Oil and gas prices don’t follow a straight line. To make gasoline, oil has to be refined and distributed, adding a new slew of costs; once gas hits the pumps, stations across the country adjust their prices based on local conditions and demand. Some gas stations have been accused of fleecing their customers; indeed, in Arizona, some faulty pump meters were found to have erroneously charged drivers, while some California stations have priced their product far above the state average. Lawmakers from the Golden State are currently looking into possible price fixing by such retailers.
But even if there is some retail trickery—which has not been proved on a mass scale—that doesn’t fix a key issue: There simply aren’t enough refineries. A large number of them closed in 2020 as pandemic lockdowns led to plummeting gasoline demand. Existing refineries are working to jack up their output and capacity, and they could get some help from the Biden administration, which assembled an emergency team to examine whether some closed-down refineries could be restarted.
Adapt Your Car!
One reason gas prices are so high, of course, is that demand is outpacing supply. And when it comes to demand, well, American drivers are certainly piling on unnecessary demands at certain points: The rush in sales of luxury SUVs, pickup trucks, and other ridiculously large vehicles is a testament to this. As my colleague Henry Grabar has noted, all of these automobiles have bottomless gas tanks and are rather energy-inefficient compared with so many other models.
One might hope the gas-price surge would lead drivers of these megacars away from combustion models, and indeed, the oil shock did spur consumer interest in electric vehicles. However, even those are bound to get more expensive thanks to myriad factors; thus, they aren’t likely to reduce gasoline demand yet. Still, as far as long-term costs go, they’re a far better investment. In the short term, you could also look into carpooling, taking public transit, or trading your truck in for a more fuel-efficient model. Heck, you could even join millions of other Americans and start riding a bicycle.