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Five Ways to Help Lower Gas Prices

The national average for gasoline is now up to $4.33 per gallon, up roughly $1.50 per gallon a year ago. Filling up a sedan can cost close to $70 while some trucks, jeeps and larger SUVs cost over $100 to fill. Low-income families have been particularly hit hard as they spend a larger percentage of their budget on gasoline and energy bills and look for ways to help lower gas prices. The economic pain extends beyond the pump as American households are paying more for groceries, going out to eat and for most other goods and services as energy is an essential input for those products. 

According to a 2019 survey, 86 percent of Americans use their own car as their primary means of commuting to work. Drivers can take several steps to improve fuel efficiency. Inflating tires, reducing unnecessary weight and slowing down are small measures that will make that tank of fuel last a little longer. Some people may be able to carpool, work remotely or use public transportation, but those options aren’t available to everyone. Going out and buying an electric vehicle, as some Biden administration officials have suggested, is available to even fewer people. 

Therefore, it’s not surprising that frustrated consumers are turning to Washington for solutions to the pain at the pump. But what can the government do to find ways to help lower gas prices? Unfortunately, there’s no easy button for President Biden to hit as the price of gasoline set by the market is largely out of the administration’s control. The price of crude oil makes up the largest share of the price of a gallon of gasoline. From 2011 to 2020, crude was 56 percent of the cost. Federal and state taxes (16 percent), refining (14 percent), and distribution and marketing made up the rest of the share. Because oil is a globally traded commodity, the price is set by factors affecting global supply and demand. 

When the pandemic hit, demand cratered to a point where oil prices briefly traded at negative prices. The oil industry struggled financially, but as countries relaxed restrictions, stronger demand led to steady price increases. U.S. supply is up and will likely reach pre-pandemic levels before the end of the year; however, Russia’s invasion of Ukraine upended markets and sent crude prices to triple digits. 

U.S. policy and regulation also affects supply and demand. While the U.S. can’t control supply disruptions in other countries or when demand increases in India, there are policy levers Congress and the administration can pull to help in the short and intermediate run.

The federal government should: 

  1. Temporarily suspend summer blending requirements. Refiners in the U.S. shut down for a few weeks in the spring to retool their operations for a summer blend of gasoline, which reduces smog. The more expensive blend can add 5 to 15 cents per gallon. While it is a sensible regulation, the government should suspend these requirements where applicable. 
  1. Repeal the Renewable Fuel Standard (RFS) or waive refinery blending requirements. A 2019 Government Accountability Office (GAO) study found the mandate was “associated with modest gas price increases in areas outside the Midwest” for “limited effect, if any, on greenhouse gas emissions.” Other studies have projected the price impact from the ethanol mandate to be even higher. The Renewable Fuel Standard is bad economic and environmental policy and Congress should repeal it. Short of that, however, the Biden administration should wave blending requirements to shield consumers from the cost of the policy. 
  1. Repeal or waive Jones Act requirements. The Jones Act mandates that oil (and other goods) shipped between two ports in the U.S. must be transported on a U.S.-built, U.S.-flagged vessel with a crew that is at least 75% American. Joe Petrowski, CEO of Gulf Oil, stated that “If foreign owned and flag ships were able to carry gasoline in US waters, the price of gasoline in the North East and in Florida could be 20 to 30 cents lower.”
  1. Approve the Keystone XL pipeline and conduct oil and gas leases sales on federal lands and waters. While not immediate, open accessing will bring more supply to the market. As we recently wrote, “Cancelling pipelines and imposing drilling bans is not going to stop oil consumption. Rather, it will increase dependence on sources with less rigorous environmental standards and from sources hostile to American interests. Any climate policy that restricts domestic production but doesn’t factor the unintended consequences of increased global emissions is a non-solution.”
  1. Eliminate steel and aluminum tariffs. Like many industries, the U.S. oil and gas industry is suffering from supply chain problems. Taxes on imports from American allies exacerbate these problems and drive up the cost of energy investment and infrastructure. Rather than amend these tariffs, the Biden administration should remove them entirely.

Waving or suspending these mandates and regulations won’t lower gas prices down to the $2.86 level they were a year ago but it’s one of the ways to help lower gas prices. Americans are struggling with high prices – not just at the pump but for nearly everything they buy. Every little bit of relief will help. Furthermore, opening access and strengthening America as the world’s largest oil producer will help buttress against future supply shocks. 

The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.

Copyright © 2020 Conservative Coalition for Climate Solutions

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