Oil prices leapt to new highs in early Tuesday trading as rumors circulated that President Joe Biden planned to announce a ban on U.S. imports of Russian oil during a mid-day press conference. The price for West Texas Intermediate jumped to over $127 per barrel, while the international Brent price rose as high as $131 in mid-day trading.
But, as markets tend to do, prices then fell once Biden had made his announcement and many traders decided that the ban, if limited to the U.S. and Great Britain, would really not make the global oil shock any worse than it already is, and that the market had already priced in the consequences of the world’s structural shortage of crude supply. WTI opened at $117.20 Wednesday morning, while Brent stood at $122, both off about $10 from the prior day’s highs. Where prices would go for the rest of the day and in the days to come was anyone’s guess.
API’s report of an increase of 2.8 million barrels of oil in domestic storage last week probably also put a moderating influence on prices, one that would be reinforced should the Energy Department report a similar storage build. This all provided at least some temporary assurance to U.S. consumers that perhaps their energy-related sky is not falling just yet after days of building panic. [Update: The U.S. Energy Information Administration reported a crude draw of 1.9 million barrels from domestic storage for last week on Wednesday.]
AAA reported that gas prices continued to rise, pegging the U.S. average price for a gallon of regular gasoline at the pump at a new record high of $4.252, an increase of 8 cents overnight and 59 cents higher than a week ago. Given that gas prices tend to lag the oil price by several business days, consumers should expect more hikes in the days to come even if the oil price should hold steady.
Meanwhile, the Biden administration was busy changing its narrative about high gas prices. After promising a couple of weeks ago to “work like the devil” to address rising gas prices, Biden himself said he “can’t do much right now” because “Russia is responsible” as he arrived in Fort Worth, Texas for an event.
At the same time, White House spokesperson Jen Psaki was using a new talking point to shift focus to Russian President Vladimir Putin: “Let me first say that Americans are paying a higher price at the pump because of the actions of President Putin,” Psaki told reporters during a press gaggle outside Air Force One in Westworth Village, Texas. “This is a Putin spike at the gas pump, not one prompted by our sanctions.” [emphasis added]
While this “Putin spike” talking point is half-true, it ignores the reality that oil and gasoline prices have risen steadily throughout the Biden administration. The average price for gas at the pump was $2.11 on the day Biden was elected and markets began pricing in his promises to restrict and ultimately diminish the domestic oil and gas industry. It stood at $2.29 on the day he took office and rescinded the federal cross-border permit for the Keystone XL pipeline. Had he not done that, that major pipeline would be complete by now and moving far more Canadian crude into the U.S. than had been coming in from Russia.
It is fair to note that, on the day before Putin ordered his forces to attack Ukraine, the average price had already risen to $3.51, up by 55% since the day Biden took office. Thus, shifting all the blame to Putin is a fairly deceptive political tactic.
Many factors have contributed to higher oil and gasoline prices. Lack of needed investment in finding new reserves, reluctance of many U.S. upstream companies to increase drilling due to investor and government pressure, instability in Europe, OPEC+ countries running short of excess capacity, and yes, the restrictive policy choices of the Biden administration have all played roles.
Throughout his term in office, Biden and his high appointees have alternated between promising to do everything they can to move heaven and earth to lower gas prices and just throwing up their hands and saying there’s nothing they can do. At some point, it would be a relief for everyone if they would all decide to just pick one narrative or the other, and stick with it.
