Why Biden is stuck on gas prices
The Biden administration needs gas prices to come down fast. But that could require supporting greater oil and gas production over the long term — the opposite of what it wants to do to fight climate change.
Why it matters: The result so far has been mixed messages and rising tensions with the energy industry, whose help the White House needs to bring gas prices down.
- The relationship between the industry and the White House has real world ramifications, since when it is contentious and frayed, it can be harder to bring relief at the pump.
- And for consumers, gas prices will likely stay high for the foreseeable future, despite a proposed gas tax holiday.
The big picture: The Biden administration has asked the oil industry to boost production and refinery output in the near term, while the White House remains committed to shifting away from fossil fuels over the long term to reduce the severity of climate change.
- "We can deal with this immediate crisis of high gas prices and still seize the clean energy future," Biden said Wednesday.
- To oil industry officials, this doesn't signal any willingness to put in place policies that would encourage companies to spend money on new drilling or refining capacity — which is what they say it will take to increase supply enough to bring prices down.
The industry has not been subtle about its asks: More drilling permits on public lands, pipeline approvals, and taking other steps — while refraining from certain regulatory moves, to encourage putting more money into energy infrastructure.
- Bob McNally, founder and president of Rapidan Energy, said the White House's view is that "I need more oil right now. I need more refining capacity right now," without "blessing new, long-term infrastructure" due to the need to move toward clean energy sources.
- "That's where the disconnect comes in," he told Axios in an interview.
Zoom in: In addition, the industry is skittish about spending money now to pump more oil, given the stress of recent boom-bust cycles. It wasn't that long ago that oil prices plunged during the first coronavirus lockdowns.
- "When the industry sees oil prices go up like a moonshot," McNally said, "the next thing they think of is the other side" — the next steep drop in prices.
- Last week, Biden sent a letter to CEOs of the largest oil refiners in the U.S., urging them to produce more gasoline. However, most refineries are already operating at or near maximum capacity. Energy Secretary Jennifer Granholm is slated to meet with these CEOs on Thursday.
The intrigue: The industry is locked in a war of words with the White House, which has been on full display this week. The friction was apparent, for example, in Chevron CEO Mike Wirth's written response to Biden's letter to refiners.
- "Addressing this situation requires thoughtful action and a willingness to work together, not political rhetoric," Wirth wrote.
- McNally says the Biden administration doesn't seem to understand that the oil industry can't turn on the spigot one day, and off the next, given the timelines, capital investment, and supply chain issues involved.
- Oil production has been increasing slowly, which the industry says is based in part on their investors' calls for spending restraint.
- Some of the friction may stem from Biden's lack of personal engagement with industry leaders, with meetings that have been sparse compared to the time he has spent with executives in other sectors.
The bottom line: McNally said the industry would be more comfortable with the policies and rhetoric of the Obama-Biden era, when the White House was publicly in favor of an "all of the above" energy strategy.
- Instead, the Biden administration is intent on pivoting away from fossil fuels, an evolution driven in part by new and more urgent climate science warnings and deadly climate change-related extreme weather events, along with efforts to implement the Paris Agreement.
- "We can walk and chew gum at the same time," a senior administration official told reporters Tuesday night. "We still have the climate imperative, in fact the climate science is only getting worse and worse on that front and we do need to accelerate the clean energy transition."