Sep 14, 2023 - Politics & Policy

Biden officials keep close eye on surging oil prices as inflation ticks up

Data: Department of Labor; Chart: Axios Visuals
Data: Department of Labor; Chart: Axios Visuals

Top White House officials are keeping a close watch on soaring fuel costs, with regular discussions to explore domestic and international options to lower prices, according to administration officials.

Why it matters: The price of crude oil crossed $90 per barrel on Thursday, its highest level since November 2022. President Biden's political advisers know that there's a direct correlation between high energy prices and low presidential approval ratings.

  • The harsh reality — for all presidents — is that they get blamed for high gas prices but receive little credit if and when they come down.
  • While there are some tools to help lower prices — like releasing stockpiles from the Strategic Petroleum Reserve or convincing international suppliers to produce more oil — there's no magic wand.
  • "I'm going to get those gas prices down again, I promise you," Biden said Thursday in a speech in Largo, Md.

Between the lines: The irony for Biden, which isn't lost on his advisers, is that today's high prices are partly the result of a robust economy that has defied expectations.

  • Officials — including national security adviser Jake Sullivan, National Economic Council chair Lael Brainard and special energy envoy Amos Hochstein — have been meeting regularly for several months in the office of White House chief of staff Jeff Zients to consider responses.

Driving the news: A sharp surge in gasoline prices — up nearly 11%, for a national average of $3.86 per gallon — was the main culprit in August's 0.6% jump in headline inflation.

  • "Gas prices are down from last summer's high by about $1.20 per gallon," Jared Bernstein, the chair of Council of Economic Advisers, told reporters Wednesday. "And that saves a family with two drivers about $120 per month."

What we're watching: In public, Biden officials are mostly sanguine about oil's upward trajectory. In private, they have regular meetings and briefings on the issue to consider options.

  • "I don't think we're at either the concern — or worrying — level, but we're monitoring oil markets very closely," said an administration official.
  • "We see continued upward pressure on oil prices through year end, with crude oil brushing up against $100 and average U.S. pump prices against $4.00 per gallon," Rapidan Energy Group President Bob McNally told Axios.
  • "If oil prices barrel through those levels, President Biden will consider SPR releases," he said.
  • Under the Biden administration, U.S. crude oil production is estimated to rise to a record 12.8 million barrels per day in 2023, according to the Energy Information Administration.

Zoom out: In March of 2022, in response to Russia's invasion of Ukraine, the Biden administration announced the release of a million barrels of oil a day from the SPR, in conjunction with allies. Later in the year, Biden extended the release for a total drawdown of 180 million barrels.

  • That has brought the SPR down to roughly 350 million barrels, its lowest level in 40 years — and half of its historical average of 720 million barrels.
  • Analysts disagree on how much of the decline in oil prices last summer was due to the release — and not a result of more Russian oil staying on the market than had initially been expected.
  • Biden's Treasury Department claimed that the coordinated release reduced gas prices by as much as 40 cents per gallon.

Zoom in: For any administration, one go-to move to lower prices is to convince countries like Saudi Arabia to pump more oil. But both Saudi Arabia and Russia have just extended their production cuts through the end of the year.

  • The Biden administration can also ease restrictions on Iranian exports, which Republicans have already accused them of doing as part of a recent $6 billion hostage deal.
  • Another option is to lift sanctions on Venezuela, allowing the Maduro regime to export more to international markets.

Between the lines: The relationship between Biden officials and the oil industry has been strained, but oil and gas companies have been consistent about their wish-list.

  • "It's clear America needs more energy production to meet historic levels of demand, but the Biden administration has instead taken every opportunity to restrict production both now and in the future," said API Senior Vice President of Policy, Economics and Regulatory Affairs Dustin Meyer.
  • "It doesn't have to be this way," he added.
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