Gasoline energy policy cannot be blamed for rising gasoline prices | OilPrice.com

None of my articles have created more views and more reader feedback than Forbes pieces in March this year – who is responsible for rising fuel prices? There are currently about 900,000 views, and I will continue to receive weekly feedback on this article.

The feedback is that Joe Biden has always been in the White House and “I think you feel stupid now” or “Even a fool can see that gasoline has raised fuel prices. ”

Let us first consider the obvious. Gasoline prices have really risen this year. In fact, the average retail price of fuel is now 1.02 / gallon higher than a year ago. Since 2014, the price is higher than ever. I think the scale of the change, more than anything else, convinces people that they should be held accountable.

At first, I was involved in enemy feedback. I probably believe this is not easy. And this will always be the case. After two exchanges, they say, “OK, I agree.” I involved half a dozen readers, and in each case they reacted to their initial outburst.

But it is not my time productive use to convince readers that they are working under the misconception. I finally decided to write this article to address some of the most common misconceptions.

The point is, there are a few steps that a president can take in a short period of time to influence oil prices. Those few actions were historically 1). Release oil from strategic oil reserves; 2). Increase gasoline taxes; Or 3). Take part in the war in the Middle East.

President Beden did not do any of these, but he has taken steps against the oil and gas industry, and he believes this has increased the price of gasoline.

President Biden’s Energy Policies

First, President Biden immediately revoked the Keyton XL pipeline license as soon as he took office. The project was rejected by President Obama in late 2015, quickly overseen by President Trump in 2017, and now rejected by President Biden in 2021.

Biden then suspended new oil and gas leases and drilling permits for federal land and water.

Those actions, readers were quick to point out, were behind the rise in fuel prices. I was deliberately blind to not see it, I was told.

See, I do not oppose President Beden’s energy policies. In the past, I have been critical of Bedden’s violent decisions. In January, I wrote about the dangers of President Beden’s energy plan, which criticized the XL erasure as a key stone. So I fully understand how these decisions can affect oil and gas prices in the long run – but not in a few months.

I asked them to explain to me that Biden’s actions had quickly increased the price of gasoline. They respond that these measures could eventually limit fuel supplies. True, but not for years. Keystone XL could affect fuel supplies ten years from now. Oil markets do not respond in real time to such events.

The drilling licenses may have a short-term effect, but even companies have been waiting for such action for years (as described here).

Oil prices are high in the Gulf of Mexico. If meteorologists estimate an additional 50% of hurricanes in the Gulf of Mexico in the next decade, oil prices will not respond. If a country bans internal combustion engines after 15 years, fuel prices will not respond today.

If the Keystone XL cuts fuel supplies in the future, why not affect fuel prices today? This is mainly because we did not know the fuel supply / demand picture at the time of the completion of the Keiston XL. Oil markets respond to OPEC activities, not actions that could affect oil supplies – we do not know what the demand for oil will be.

Oil / gas price correlation

Let’s look at the price of gasoline over the past 20 years with West Texas Medium crude oil prices.

This graph shows a significant correlation between the price of oil and the average retail price of oil. How high is this bond? According to my Excel analysis, it is 96.8% over the last 20 years. In other words, oil price changes are almost entirely related to fundamental changes in oil prices.

Short-term refinery interruptions (to reduce fuel prices and increase gasoline prices) and seasonal changes in fuel (which could affect fuel prices) can occur, but the main thing is, “If you want to understand what is happening, look at fuel prices.

So, what is the explanation?

Note that oil and gasoline prices start to rise. That increase began in May 2020. Oil prices have tripled between the first week of May 2020 and the last week of December 2020. Was President Trump responsible for this?

No, the reason for the increase in the price of oil and gasoline is that the economy is starting to recover from the closure of VV-19. Those closures negatively affected two million barrels of U.S. oil supplies, and those supplies were slow to recover after the economy opened. That is why the price of oil and gasoline is soaring.

Remember that the whole world has experienced this. Do people honestly believe that the cancellation of the Kikiston XL pipeline has increased fuel prices in Tokyo? In addition, this increase in prices has affected most commodities. Rising prices of wood, the price of basic metals, cotton, rye, sugar — we have all seen the impact of VV-19 on the economy.

The oil industry is over this year

One thing is for sure, if you are a supporter of the American oil industry, you should encourage higher oil prices. In recent years, low oil prices have pushed many producers out of business. In fact, during President Trump’s tenure, oil prices plummeted. I still do not blame him for this. It is the function of macro factors that influence fuel prices.

Oil prices have risen this year, and so have oil producers’ stock prices. For example, Conno Phillips, the world’s largest independent oil and gas company, grew by 64 percent a year. Other oil companies have made similar profits. Should they thank Biden? No, that is not the reason for the increase in fuel prices.

But, I will repeat something I pointed out earlier this year. Either Biden is raising the price of gasoline to support the American oil industry, or Biden’s policies have nothing to do with higher oil prices, so his policies are doing nothing to help the US oil industry.

It is really the latter. Gasoline prices have risen sharply this year, but neither loans nor losses are worth it – although long-term policies could lead to higher gasoline prices in the long run.

By Robert Rapier

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