While decreasing gas demand has prices below June’s record highs, the cost per gallon is still at levels never seen before this year. Despite President Joe Biden’s efforts to paint the problem as “Putin’s price hike,” the political pressure is on the Biden administration to lower domestic prices, though most of its ideas are being met with resistance.
U.S. oil companies, increasingly at odds with the president over the cause of rising oil prices, urged Biden against banning fuel exports, which have been rising to near record levels lately. While forcing companies to keep oil products in the country could increase domestic supply and depress demand, refiners could decide to bring down output in response.
“I think that would be a very bad idea,” said Andy Lipow, president of Lipow Oil Associates. “While in the short term, it might mitigate some of the increases in oil prices, what you’ll actually see is investment will start to come to a halt in the oil patch here in the U.S.”
U.S. oil production is still lagging below pre-pandemic levels, though it is on the rise. As of June 24, the Baker Hughes rig count is up 60% compared with last year. But the nation is still far below the near 13 million barrels of crude oil produced every day at the end of 2019. Part of it, Lipow said, is the residual pain from tanking COVID-19 pandemic prices and bankruptcies that ensued. Supply chain issues are also at play. Another factor is the political environment between two vastly different administrations.
“The [Biden] administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” the American Petroleum Institute said in a statement aimed at the president.
While Biden has harped on oil refiners to boost production with rising prices, critics say his positions on fossil fuels are discouraging that investment.
“In the back of their mind, they are concerned that we have an administration that really wants to phase out fossil fuels, so how much investment do you really want to make over the next five or 10 years is the big question in their mind,” Lipow said.
That said, high oil prices have been enough to convince some companies to start increasing budgets and investments despite worries about the future.
“They always say that the cure to high prices is high prices, and that’s exactly what I think we’ll see,” ExxonMobil CEO Darren Woods told the Financial Times. “So it’s a question of how high prices eventually rise.”