This month’s energy inflation numbers – 35 percent overall, including 48.7 percent for gasoline – are a sobering reminder of the pain Americans are feeling every time we drive, buy groceries, or go on vacation. Since President Biden has been in office, the average cost of gasoline has more than doubled.
This pain at the pump is felt by every American, but higher energy prices disproportionately impact lower income Americans.
The price of gasoline is largely tied to the international price of crude oil. While there is no quick fix to lowering gas prices in the short term, there are policies that the administration can support that would promote increased production, to get more crude into the global marketplace and drive down prices.
The American Shale Revolution unleashed energy production and lowered prices during the last recession. The linkage between increased supply and lower prices is clear. During the Shale Revolution (when domestic energy production increased due to hydraulic fracturing and horizontal drilling technologies that unlocked vast amounts of American energy), household energy prices actually dropped by nearly 15 percent from 2008 – 2019, while the costs of other household goods increased significantly.
If the Biden Administration wants to help ease the disproportionately high energy inflation that is causing skyrocketing gasoline prices and fueling inflation across the economy, they should take the following actions to increase domestic production of crude oil, and thus lower prices Americans are paying at the pump:
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- Support Access to Produce on Federal Lands and Waters: Oil production from federal lands and waters provides approximately 24 percent of total US oil production. Amidst the global backdrop of high energy prices and skyrocketing inflation, the Biden Administration and Congress should find ways to support federal production to help increase supply of oil into the marketplace. At this point in the Obama Administration, DOI had held over 50 lease sales. This Administration has held zero. Because of a court order, they recently announced they will hold their first onshore lease sale in June, but with 80 percent less available parcels and a 50 percent increase in royalties. Providing access to federal lands sends a signal to the market that there is a future in oil and gas.
- Support the Buildout of Pipelines: Pipelines are the most efficient way to deliver energy from where it’s produced to where it is turned into useful fuels and products – like gasoline and jet fuel – to meet demand. As demand increases, so does the need for pipelines to deliver crude oil cleanly and safely across the country. If the Administration wants to support production of crude oil here in America, they need to ensure the National Environmental Policy Act (NEPA)’s review process for pipeline permits is clear and consistent and provides regulatory certainty that supports the infrastructure we need to deliver energy to the American people. The Biden Administration should revise NEPA to establish agency uniformity in reviews, limit reviews to two years, and reduce bureaucratic burdens that restrict the ability to build large energy projects like pipelines, highway, and transportation projects. They should also support the buildout of pipelines like the Keystone XL, which supports thousands of jobs and lower energy prices for the American people.
- Encourage Capital Investments in American Energy Production: The Securities and Exchange Commission should reconsider its burdensome climate disclosure proposal that, if implemented without needed reforms, could discourage financial institutions and investors from investing in American energy companies, which rely on large amounts of capital to unlock the American energy supplies needed to support demand in the marketplace for affordable and reliable energy. The Administration should direct the SEC to do away with its unnecessarily complex and largely unworkable proposal and instead ensure that any climate-related financial reporting for the oil and gas industry is practically feasible, only includes material disclosures, and avoids creating confusion for investors and disrupting capital markets.
- Relieve Supply Chain Bottlenecks: The complex process for drilling and completing a new well in the United States takes time and significant resources, exacerbated today by challenges we face from supply chain disruptions and labor shortages. There is a great deal of uncertainty right now about everything from storage levels to additional sanctions to how OPEC producers will respond to increased American production. Inflationary costs, labor shortages, and supply chain disruptions for steel pipe and other necessary components are further hindering increased production. In fact, projections show inflationary pressures could lead to 15-20 percent in additional capital spend just to keep current oil and natural gas production levels and could go even higher. The Biden Administration should rescind steel tariffs that remain from US allies as steel is a critical component of energy production and work with our industry on reducing supply chain bottlenecks.
Companies don’t set the price of oil or natural gas, but we do make long-term decisions based on timing, capital, and the regulatory environment. The best way to ensure we have stable supply and prices, now and into the future, is by working with our industry on smart policies and sensible regulations that support plentiful production of crude oil supplies to meet demand.