WASHINGTON. While White House spokespeople celebrate lower gas prices in public, administration officials privately worry that prices may climb again if they don’t find a way to get additional oil to market.
The average price of gasoline dropped below $4 per gallon last week, and the White House took the opportunity to defend Vice President Joe Biden from Republican accusations that he was responsible for the dramatic increase in petroleum costs.
However, oil dealers, industry executives, and ex-administration officials all warn that prices might easily climb again due to the persistence of many of the factors that caused the early summer price jump, including limited refinery capacity and uncertainty over Russia’s war in Ukraine.
Price drops have been happening recently, but experts say the White House isn’t to blame. Instead, they point to recession worries as the Federal Reserve rises interest rates, a minor drop in consumer demand from earlier high prices, and growing global prices. production.
When it comes to domestic influences on oil prices, the Federal Reserve is currently the most influential. According to Daniel Yergin, vice chairman of S&P Global and author of The New Map: Energy., Climate and the Clash of Nations, the oil market is “definitely present” with the possibility of a recession.
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Gas prices dropped by more than a dollar from their June high of 13 cents per gallon to their current level of 31 cents per gallon, according to analysis conducted by the Treasury Department and cited by administration officials. The 11 cents that was lost was due to foreign countries.
Business analysts claim that Biden’s efforts to reduce the price of oil and increase output, which include publicly criticizing the oil and gas industry for its record profits, convening an emergency conference with executives, and threatening to withdraw unused drilling permits, have had little effect. Even while oil output has gone up, it has done so at the same rate as anticipated before Russia invaded Ukraine.
Indeed, there was no policy to which we could direct your attention that would improve matters. According to Jeff Moody, vice president of government relations for US fuels and petrochemicals, the major message from CEOs who have visited with the White House in recent months has been “don’t make things worse.” They didn’t do a number of things they knew would have made things worse, but they assumed they had. Therefore, I would suggest that they don’t interfere until they want to take full responsibility for something.
Even if gas prices have dropped during the summer, they are still around their record highs before the outbreak. The price of a gallon of gas is currently over a dollar higher than it was in 2019 before the pandemic prompted demand to plunge and oil producers and refiners to curtail production, an increase of approximately 75 cents over the same time last year.
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While celebrating the recent drop, administration officials acknowledge that prices could climb again, although they expect prices to fall a little more as demand normally dips in the fall. A worldwide marketplace, as it were. One administration official acknowledged that “anything can happen” in light of recent events in Russia and Ukraine.
During an interview with CNN on Sunday, August 14th, Energy Secretary Jennifer Granholm said, “We hope that’s true, but, again, it can be affected by what’s going on in the world.” Granholm was referring to a report from the U.S. Energy Information Administration that predicted prices would fall to $3.78 per gallon in the fourth quarter.
As the government starts to refill some of the barrels Biden sold from Strategic Oil Reserves, one of the actions it plans to do is to assure that oil firms can sell their oil to the US government at a predetermined price.
Historically, the government has paid market rates for oil deliveries, which could be more or lower than the agreed-upon price. It might take oil companies months or years to get started on new drilling operations, therefore the official said having a fixed price now could help reduce some of the risk involved in making that investment.
The administration is also negotiating with European and Asian partners on a plan to cap the price of Russian oil in an effort to reduce gas prices and reduce the Kremlin’s revenue. During the G7 summit in June, the participating countries settled on a price ceiling with the intention of putting it into effect by the end of the year. Industry experts, however, warn that if Russia reduces production in response, an artificial shortage would be created, which might lead to higher pricing.
After five refineries shut down during the epidemic as demand for gas dropped, this is one of the primary issues. And next year, Lyondell’s Houston refinery, which produces more than 200,000 barrels a day, is due to close.
Another fundamental issue that remains is the friction between Biden’s climate ambitions focused on transitioning away from fossil fuels and the necessity for oil companies to scale up output to satisfy continual consumer demand.
An administration official has stated that the White House is in constant contact with refiners to discuss methods to assist keep production moving and reopening shut-down refineries. One sign of progress is that PBF Energy just restarted production at its New Jersey refinery, which will raise capacity by 50,000 barrels a day, the official said.
“We are working to solve these challenges, in the same manner, we do in other parts of our supply chain, whether ports or infant formula,” the person said. “Even if these are private transactions, the government can play its part in seeking to eliminate any obstructions if it is in the public interest to do so.”