Election Day Gas Prices $1.41 Higher Than When Biden Took Office

In an aerial view, the Strategic Petroleum Reserve storage at the Bryan Mound site is seen in Freeport, Texas, on Oct. 19, 2022. (Brandon Bell/Getty Images)

News Analysis

Average U.S. gas prices this Election Day, are $1.41 higher than they were when President Joe Biden took office, a bad sign for the Democrats as voters went to the polls for the midterms.

When Biden took office on Jan. 20, 2021, the average price for a regular gallon of gas, stood at $2.39. but as of Nov. 8, the price has increased to about $3.80 per gallon, according to the American Automobile Association.

After a brief downturn last month, the average pump price rose four cents over the past week, despite fewer drivers on the road in early November.

A rise in oil prices, caused by cuts in Russian crude production, has renewed concerns about a tightening in global energy supplies, AAA reported.

However, another round of pandemic related lockdowns in China, may trigger another potential slowdown for the world economy and could prevent further increases at the pump.

Another factor in gas price hikes is OPEC’s decision to cut oil production, despite pleading from the Biden administration.

Increasing oil prices indirectly leads to higher pump prices as refineries pay more for the crude.

“The oil market, like the stock market, hates negative headlines, no matter how speculative,” said Andrew Gross, AAA spokesperson.

“And that is why we see the oil price back over $90 a barrel. More expensive oil usually leads to more expensive gasoline, but the recent Covid-related news from China may stem this increase.”

Higher gas prices and high inflation have hurt Biden and the Democrats in the polls, which may cause them to lose their majorities in both houses of Congress after the midterm elections.

The current U.S. inflation rate is at a high of 8.2 percent, caused by rising input costs for everyday consumer products.

The Federal Reserve, last week, announced its fourth 75 basis-point rate hike this year and will likely increase again next month, as inflation remains well above its 2 percent target.

Republicans are using inflation and high gas prices as a key issue to win over voters this election season.

“Joe Biden’s war on American energy has forced families across the country to empty their wallets to fill their tanks,” Republican National Committee Chairwoman Ronna McDaniel told Fox News back in June.

“Unfortunately, Biden is doubling down on his disastrous agenda because he’s not the one paying the price—the American people are.”

Diesel Shortages And Energy Investor Demands

Meanwhile, short-term thinking by energy investors has caused them to demand that oil companies reduce drilling to avoid overspending and to use their assets for dividends and buybacks.

A survey of oil producers released by the Dallas Fed in March, showed that many producers were refraining from further drilling due to negative investor sentiment.

There has also been a noticeable nationwide diesel shortage in recent weeks, with some pumps running dry in the Southeast and supplies running dangerously low in the Northeast.

Biden’s ban on U.S. purchases of Russian oil products has partially led to the shortage of diesel, as Moscow once supplied 20 percent of America’s imported refined oil products.

The surge in diesel prices, which is currently at $5.351 a gallon, has contributed to food inflation and a rise in consumer goods prices.

On a year-over-year basis, gas prices are up 15 percent, while diesel is up 43 percent.

There is concern in many quarters that with less than a month’s nationwide supply of diesel, this may cause interstate commerce to halt within weeks.

Biden Versus Congressional Republicans On Domestic Energy Policy

Republicans have called for an increase in domestic oil production to lower prices, but President Joe Biden has not taken to that idea in his actions, and may oppose such a move if his opposition takes control of Congress.

The White House had initially banned new permits for drilling on federal land, but allowed for some drilling in recent months, as oil prices rose in the months preceding the elections.

However, there may be a few political moves that a Republican-controlled Congress could do to reduce market gas prices.

Republicans could force some compromises on the White House, such as issues like permits for energy infrastructure investments.

“When it comes to energy policy specifically, we think the Biden administration may have to make trade-offs on the regulatory front—particularly around additional permitting for oil and gas projects and pipelines—in order to secure Republican support for climate initiatives such as additional tax credits for renewables,” RBC Capital Markets analyst Helima Croft told Barron’s.

Another major factor for elevated gas prices is the lack of enough refineries domestically or overseas, as no new gas processing facilities have been built in the U.S. for decades.

When a few refineries shut down for maintenance or due to major storm damage, there have been temporary fluctuations in gas prices.

Even if Republicans take charge of Congress, building new refineries will take a few years.

Biden has used alternative means to increase the oil supply and lower gas prices, such as tapping into the Special Petroleum Reserve. In May, the president announced the release of 180 million barrels from the reserve supply of which the final tranche was released in October.

Biden has also floated the possibility of imposing a windfall tax on oil companies, if they did not spend enough to increase production and lower prices.

He demanded that oil companies must invest their record-setting profits to lower costs for Americans and increase production, or face additional taxes on their earnings.

The president claimed last week, that energy companies had raked in $100 billion in revenue over the past six months and that gas prices would drop by 50 cents if those profits were passed onto consumers.

However, there was little support for that policy event under the current Democrat-controlled legislature, and it would be impossible if the Republicans win a majority in Congress.

Biden could impose limits on U.S. fuel exports through executive action, causing average national prices to fall, as increasing foreign demand, especially from energy-starved Europe, has cut into domestic energy supplies.

Republicans are expected to block any such move if they secure a majority after the midterms.

“Thirteen House Republicans in the Committee on Oversight have already sent a letter of concern to the Energy Secretary over the ‘potential misuse’ of the SPR and concern that the administration may soon impose an export ban,” Croft noted.