Most good deceptions have a grain of truth. Presidents and politicians who have felt the political heat of high gasoline prices are often quick to say they have no control over prices at the pump. Reality is more complicated, as many factors contribute to the price of gasoline. But several of the most critical factors are absolutely within the control of our leaders in Washington, and there are a number of things they can do to relieve the upward pressure.
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Article Series: What You Need to Know About Gas Prices
This is No. 5 of a series of five articles exploring many aspects of gas prices—from what goes into the price of a gallon of gas to recommendations for policymakers to bring prices down. Click HERE or check out the bottom of this article to see other articles in this series.
No one policymaker can command the market price of gasoline (and other petroleum-based transportation fuels like diesel and jet fuel) or totally insulate American consumers from changes in global markets. The price of crude oil (the biggest driver of gas prices) is a complex, ever-shifting communication between supply and diverse customer demands.
Labor costs, weather, refining, distribution, market expectations about the future, and a vast array of other factors are all priced into a barrel of oil and filtered into the price a driver pays at the gas pump.
However, policy choices can make all of these factors either more time consuming, risky, and ultimately costly—or they can reduce roadblocks to energy, influencing prices for the better and bolstering the ability of energy producers and their customers to respond to the inevitable shifts, innovation, and disruptions in energy markets.
A policy agenda that allows for energy abundance and efficient markets has profoundly positive impacts for Americans. Modeling by The Heritage Foundation shows that, compared to Washington’s current agenda to reduce access to conventional energy (including oil), pursuing an energy-abundance policy and embracing and unleashing energy would yield the following results through 2040:
- increase aggregate GDP (the value of all the goods and services produced annually within the United States) by $3.4 trillion,
- increase aggregate GDP produced per family of four by $39,000, and
- reduce gasoline prices by $0.20 per gallon in the short run and $0.60 per gallon in the long term.
This is not surprising since oil supplies 90% of Americans’ transportation needs and is a major enabler of Americans’ productivity, mobility, wellbeing, and opportunity.
Other benefits of an energy abundance agenda include what Americans don’t notice—gasoline prices that would be worse without increased supply. There are abundant oil resources in the United States, and U.S. crude oil production has more than doubled since 2008 thanks to innovations in hydraulic fracking technology (a drilling technique using pressurized liquids to fracture bedrock for extracting underground oil and gas).
This increased global supply dulls the impact of the market disruptions. For example, American drivers hardly noticed a blip in prices when Iran attacked the world’s largest crude oil processing facility in Saudi Arabia in 2019.
Unfortunately, the Biden administration’s actions have only continued to raise barriers to conventional American energy for the long term with a radical policy agenda to force a costly transition away from oil and other conventional energy resources. This is an agenda for high gas prices.
A policy agenda to help to decrease gasoline prices would increase Americans’ access to America’s energy abundance long into the future. Specifically, it would:
1. End the regulatory war on oil producers and consumers. The cancelation of the Keystone XL pipeline and oil drilling leases on federal lands are only just the most visible examples of the current administration’s radical energy policy. The administration’s whole-of-government regulatory agenda aims to phase out the production and use of oil. It is doing that with everything from discouraging private sector investment in conventional energy companies with left-wing environmental, social, and governance—or ESG—mandates, all the way to thwarting the ability of consumers to choose what kind of vehicles they can buy in the future with heavy-handed regulations.
2. Send a clear political message that U.S. policy will not pick energy winners and losers. Policymakers should reject the false choice posed by the Biden administration—renewable energy or conventional energy—and instead make clear that the U.S. is open for energy business of all kinds—allowing competition, innovation, lower prices, and a more reliable supply.
3. Allow increased energy production on federal lands and waters. The administration should immediately reinstate legally required oil lease sales on federal lands. Congress should make holistic reforms to streamline federal leasing and regulatory processes rather than bargain with bureaucrats to follow the law. Congress should also devolve power to states and let them substitute their regulatory processes for energy production on federal lands within their borders.
4. Remove barriers to energy production on private and state lands where most American energy production occurs. The administration must remove unnecessary new regulations on methane emissions that result from oil production and distribution, discontinue using the “social cost of carbon” calculation as a shadow carbon tax in its regulations and permitting processes, and end the threat of weaponizing federal air quality standards to prevent new energy production. Congress also must rescind wasteful government spending and tax favors that it hands out to favored green energy companies that couldn’t survive in the marketplace on their own.
5. Relieve chokepoints in energy distribution that bad policies have created. Congress must eliminate or drastically reform policies that needlessly contribute to higher production costs and supply-chain inefficiency. These include the failed Renewable Fuel Standard, the Jones Act, and permitting schemes under the National Environmental Policy Act and the Clean Water Act.
6. Allow Americans to invest in energy projects they believe will bring them good returns without fear of political retribution. Energy companies of all kinds should find the U.S. a welcome place to do business, free of cronyism and government favoritism. Protecting Americans’ ability to engage freely in energy markets requires that Congress eliminate investment tax credits for certain government-favored kinds of energy.
The administration must also remove regulations that discriminate against conventional energy companies and prevent them from getting business loans, eliminate regulations that micromanage federal pension investment plans to prioritize climate factors over employees’ financial benefit, and remove regulations that mandate disclosure of “climate risk” by public companies.
7. Protect consumers’ ability to choose energy sources. The government should neither force consumers to use politically preferred energy sources nor protect energy companies from having to compete for Americans’ business. The administration should rescind the president’s executive orders to mandate the federal government purchase electric vehicles and eliminate regulations to phase out conventional cars and trucks. Congress must also eliminate special tax favors for electric vehicles.
8. Strengthen partnerships with allies and trading partners. Americans benefit from a robust, diverse network of energy trading partners committed to freedom. Increased global energy production is one of the best ways to dilute the power of adversaries seeking to weaponize energy markets for political leverage.
Congress and the administration should reaffirm the mutually beneficial trade relationship with Canada by immediately approving permits for the Keystone XL Pipeline and removing regulatory roadblocks for similar energy infrastructure projects. The U.S. should also extend regulatory, legal, and technical expertise to partners (particularly in Europe) to help them successfully adopt proven energy technologies like nuclear power and hydraulic fracking.
9. Overhaul existing policies that block access to energy. States also play an important role in advancing a policy agenda for energy abundance. State policies to ban hydraulic fracking, cap construction of new gasoline stations, ban or phase out the sale of gasoline and diesel powered vehicles, grant tax favors to electric vehicles, and arbitrarily block pipeline infrastructure are not only misguided attempts to protect the environment, but actively work against access to resources that meet most Americans’ energy needs.
In the end, U.S. policymakers are not without tools to relieve pressure on gasoline prices today. The way out of high gasoline prices is increased supply and innovation. Americans should be free to invest in, explore, produce, build and operate the necessary infrastructure, and use the types of energy that meet their needs. Such a policy agenda would strengthen the United States and protect American consumers no matter what the future holds.
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Other articles in this series:
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