How Much Of The Gasoline Price Surge Is President Biden’s Fault?

One year ago this week, I wrote an article for Forbes about who is to blame for rising gasoline prices. The article got more than a million views, and spawned a lot of feedback.

The same dynamic that I wrote about a year ago is still responsible for most of the gasoline price increase over the past 18 months.

The Covid Effect

The U.S.'s oil production hit an all-time high of 13 million barrels per day before the Covid-19 epidemic. Demand for oil fell as the Pandemic unfolded. By May 2020, oil production had dropped by more than 3 million barrels per day.

The oil companies went out of business when demand fell. Some small stripper wells, which account for a decent amount of U.S. oil production, were permanently capped because of the bleak outlook. Workers left the oil industry. Demand began to bounce back as people went back to work, but production slowed due to the issues.

The U.S. was playing catch up after the production collapse of 2020. In response to insufficient supplies, rising oil prices are the main reason for the surge in gasoline prices.

The price of oil went up in the last three months of the Trump administration. The price of West Texas Intermediate (WTI) averaged $52.00/bbl in January 2021.

In the first three months of the Biden Administration, the average monthly price of WTI rose by another 19%. In the three months after that, prices went up another 17%. Between $70/bbl and $80/bbl were the prices until January 2022. More on that can be found below.

PLAY Full Screen About Connatix 1/1 Skip Ad Continue watching after the ad Visit Advertiser websiteGO TO PAGE

Many people attribute the price rise to President Biden, but it actually began before he took office. It wasn't President Trump or President Biden's fault that the price was going up all over the world.

The money that both presidents approved had an impact. People spend their money when they have more money. Demand for goods increases. Stimulus money was a small part of the gasoline price rise, but it was mostly due to the oil price surge caused by the Covid-19 demand plunge.

The current US oil production is 11.6 million BPD, which is still short of pre-pandemic production. Supply is going to lag demand for a bit longer, and that will keep gasoline prices up.

The Putin Effect

Let's talk about something that President Biden did. I often point out that a President has little power to change gasoline prices in the short term. Those handles are mostly used. The oil was released from the reserve. Changing the tax on gasoline. There was involvement in a war. There is a rapid impact on gasoline prices from all of these things.

When it looked like Russia was massing troops on the border, oil prices went up. The average price of the oil in January was $82/bbl. When Russia invaded Ukraine, the average price went up to $91.64/bbl. I think the price rise is due to the world's response to the invasion.

President Biden is responsible for one action. The decision by Biden to stop buying Russian oil caused oil prices to go up. They have retreated from that level, but the inefficiencies involved in rerouting Russian imports and backfilling that oil will keep a premium on prices.

I don't know if it was the right or wrong decision. I agree that Biden made the decision in response to Russia's actions.

You may think that banning Russian oil was the right move, but it does impact gasoline prices. It was the first decision President Biden made that had an immediate impact.

Some releases of oil from the Strategic Petroleum Reserve may have had an impact. If they did it was fleeting, and only provided a small supply boost in a market that is undersupplied.

Many people think that the cancellation of the tar sands line has caused gasoline prices to go up. That could be a long-term impact. It doesn't affect prices today, but the absence of the decision may result in higher prices in the future. The impact of Biden's decision to ban Russian oil is immediate.