Here's what Biden can really do to ensure gas prices are 'affordable'

By Robert Schroeder

Gasoline prices are on the rise this election year, and President Joe Biden's team wants to make sure they're "affordable" for Americans. But can the White House actually do that?

The short answer is that Washington doesn't have much power to control those prices (RB00). But presidents do have a couple of ways to influence them.

"Gasoline prices, like all commodities, are subject to market conditions," Brian Milne, product manager, editor and analyst at DTN, told MarketWatch. "Yet the Biden administration could take measures that allow for greater supply."

Chief among those levers to pull, experts agree, is use of the Strategic Petroleum Reserve, the U.S.-operated supply of emergency crude oil (CL00).

The Biden administration sold oil from the reserve in 2022, in an attempt to lower gasoline prices following the Russian invasion of Ukraine.

The Treasury Department estimated those SPR releases, in concert with the U.S.'s international partners, lowered the price of gasoline by 17 cents to 42 cents a gallon.

"There's no question in my mind that SPR sales in 2022 were a game changer" for gasoline prices, Tom Kloza, global head of energy analysis at OPIS, a Dow Jones company, told MarketWatch.

Administration officials including National Economic Adviser Lael Brainard have been asked in recent days about use of the SPR again, but have not promised such action.

"We'll continue to very closely monitor and make sure that gas prices remain affordable," Brainard said at an event in Washington on Thursday.

Yet "unaffordable" is a loose description and could allow the administration to again tap emergency reserves if it feels gas prices are too high ahead of the presidential election in November, said Milne.

Now read: White House 'carefully monitoring' gasoline prices to make sure they're affordable, Biden aide says

J.P. Morgan analysts said in a note late last month that the odds of another release from the SPR will increase if nationwide U.S. gasoline prices move closer to $4 a gallon, or if OPEC+ doesn't increase production at its June 1 meeting.

The average price for regular unleaded stood at $3.679 a gallon on Friday, up about 19 cents from a month ago, according to AAA.

Also read: 'Extremely active' hurricane season may lead to late-summer surge in gas prices

Beyond selling or buying SPR oil, a president's or lawmakers' influence over gas prices starts to get trickier.

"Washington has very little power," said Kevin Book, managing director of ClearView Energy Partners, an independent research firm based in Washington.

"There is no national oil company, so that means that the White House will inevitably have to choose between the SPR or other people's oil," Book told MarketWatch.

Book noted that one tool is rhetorical, in the form of trying to petition OPEC for extra production.

But foreign oil producers aren't under obligation to heed U.S. demands. In 2022, Biden was angered over the Saudi Arabia-led OPEC+ decision to cut oil production. White House officials said that move would help another OPEC+ member, Russia, pad its coffers as it continued its war in Ukraine.

On Friday, the administration announced it has used its emergency powers for a third consecutive year to authorize sales of higher-ethanol E15 gasoline this summer. Such gasoline sells at a discount to the conventional blend.

Yet a similar move two years ago was found to represent sales at less than 2% of all U.S. gasoline stations, as the vast majority don't sell E15.

Now see: Biden touts savings from summer sale of E15 gas, but analyst sees 'no price relief' at most pumps

Washington can also influence gas prices by changing tax policy. However, the federal gasoline tax of 18.4 cents a gallon hasn't changed since 1993. Biden pushed for temporarily suspending the federal gas tax in 2022, but Congress didn't agree. The tax dollars go toward road construction and public transportation.

Nikki Haley, who challenged Donald Trump for this year's Republican presidential nomination, proposed eliminating the federal tax altogether before she ended her campaign.

While Biden or any presidential incumbent is vulnerable to pocketbook issues like the price of gas, Kloza argues it would be unfair to lay blame at an American politician's feet given current U.S. oil output.

"Any of the problems we have with high gas prices now have nothing to do really with U.S. production, which is the highest any country in the world has ever seen," he told MarketWatch.

Myra P. Saefong contributed to this report.

-Robert Schroeder

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04-19-24 1600ET

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