Opinion: Biden Can Have Cheap Gas or Fight Climate Change — Not Both

August 16, 2021

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(Washington Post) President Biden and the Democratic Congress have ambitions to fight climate change and legislative plans to match. So far, however, those plans consist almost entirely of clean-energy mandates and subsidies. Mr. Biden, and even progressives in Congress, have ruled out what the policy economists — and common sense — tell us would permanently curb demand for fossil fuels: a carbon tax, or its first cousin, higher excise taxes on motor fuels.

The costs of this refusal are not only environmental but also geopolitical, as we learned on Wednesday when national security adviser Jake Sullivan, bemoaning high oil prices, and the elevated prices at the pump for U.S. motorists they bring, appealed to the “OPEC+” petroleum-producing nations to “do more to support the recovery.” Translation: Please pump more crude oil, the main ingredient of motor fuel.

Republicans attacked Mr. Sullivan’s comments as evidence that Biden policies such as the curtailment of domestic oil and gas leases on federal land, and cancellation of the Keystone XL pipeline, were undermining hard-won U.S. energy independence. They have a point: Crude oil is a fungible commodity. It seems strange indeed to encourage drilling in Saudi Arabia and Russia — they call the shots in OPEC+ — while discouraging it in North America. It seems even stranger when you consider the human rights records of these two countries, and other cartel members such as Venezuela and Iran. Why would we cede control of the lucrative global oil market to these repressive regimes, much less make ourselves indebted to them for lowering our politically sensitive gas prices?

The answer, of course, is not to “drill baby drill” but to effect a structural shift in U.S. energy demand so that this country is less dependent on all suppliers of fossil fuels, both foreign and domestic. Taxes are an inescapable element of that. Even a relatively modest increase in the federal gas tax could make a real difference: Twenty-five cents per gallon would save 1.3 billion barrels through 2050, according to Energy Innovation, a nonpartisan climate policy think tank. Twenty-five cents may sound like a lot compared with the current tax of 18.4 cents (though not with the $2.35 average in the European Union). In fact, much of the increase would simply recoup the 40 percent decline of the gas tax’s real value since 1993, when Congress last raised it.

Considered as an imposition on consumers, higher gas taxes are indeed a hard sell, politically, although many states have raised their levies to fund transportation infrastructure and other needs in recent years. Viewed more realistically, as an investment in undermining both Big Oil and OPEC+, they seem rather more attractive. READ MORE

Biden’s pro-car, pro-gasoline moves leave green allies fuming: The climate-focused administration is "caught between what it needs for elections and its long term policy goals." (Politico)

“Disappearing” Carbon Tax for Non-Renewable Fuels (Advanced Biofuels USA)

BIDEN CRITICIZED FOR IGNORING BIOFUELS AS GAS PRICES HIT 7-YEAR HIGH (Brownfield Ag News; includes AUDIO)

US juggles Opec+ and long-term demand (Argus Media)

Drill, OPEC, Drill? (Morning Consult)

Outcry grows after White House looks to OPEC+ to help quell rising gasoline prices (S&P Global)

Senate Democrats urge Biden to consider tapping emergency oil reserves or even ban oil exports to fight high gas prices (CNN; includes VIDEO)

SPR SPILLS OVER: (Politico's Morning Energy)

Opinion: Yes, gas prices are up. But cutting the gas tax is not the answer. (Washington Post)

Democrats weigh gas tax holiday to ease inflation pressure on Americans (CBS News)

White House, congressional Democrats eye pause of federal gas tax as prices remain high, election looms -- They have struggled to address public frustration over inflation, and fuel prices have been one of the biggest issues (Washington Post)

Democrats Weigh Gas Tax Holiday and Deficit Cuts as Inflation Mounts -- Democrats are looking to revamp their legislative agenda to focus on relief for rising prices before November’s midterm elections while trying to salvage their social policy bill. (New York Times)

Democrats propose federal gas tax holiday ahead of midterm elections -- Democrats up for reelection look to address voters' concerns ahead of midterms. (ABC News)

Republicans Are Unlikely to Back Gasoline Tax Break: Key Senator (Bloomberg Tax)

GAS TAX HOLIDAY: (Politico's Morning Energy)

GET YOUR GOVERNMENT HANDS OFF MY GAS TAX: (Politico's Morning Energy)

Excerpt from Argus Media: It fears that a jump in gasoline and diesel prices at this point would fall heavily on low-income voters in the form of higher costs for goods and transportation, particularly because the higher cost of EVs and limitations in charging infrastructure prevent them from accessing alternatives. READ MORE

Excerpt from Politico's Morning Energy: SPR SPILLS OVER: Independent oil companies are protesting a possible sale of oil from the Strategic Petroleum Reserve that the Biden administration has floated as a response to high gasoline prices. “If the government regularly released SPR oil for sale each time domestic fuel prices rose, we could reduce our ability to address a situation with the potential to seriously injure the U.S. economy,” the Independent Petroleum Association of America said in a press release. Oil producers worry that adding supply to the market now would slow down companies who are still trying to restart the drills they stopped during the pandemic.

If the Biden administration goes the SPR route, it will have the law on its side. Congress has twice in the last six years written mandatory SPR sales into budget law: The 2015 Bipartisan Budget Act requires the Department of Energy to release 8 million barrels of oil in 2022 while the 2018 Bipartisan Budget Act requires DOE to release 30 million barrels between next year and 2025. READ MORE

Excerpt from Politico's Morning Energy: GAS TAX HOLIDAY: Senate Democrats have been batting around suspending the federal gasoline tax to lower prices, and the idea came up at their weekly lunch on Tuesday. But it’s not clear the entire caucus is on board, and the White House isn’t diving in directly, only stating that "all options remain on the table."

Republicans, meanwhile, aren’t eager to help Democrats address what they view as a partially self-inflicted wound from high energy prices.

“This administration has made it more expensive to produce American energy. Now they want to get rid of the gas tax,” Sen. John Barrasso of Wyoming, the top Republican of the Energy Committee, told Pro’s Josh Siegel. “This flies in the face of this administration’s policies.”

Barrasso also noted that a quartet of Democrats up for election in 2022 are among those proposing a suspension of the 18-cents-per-gallon gas tax through the end of the year.

Meanwhile, Joe Manchin, the centrist Energy Committee chairman, agrees with Republicans opposing a federal gas tax holiday, telling Punchbowl News, “it doesn’t make any more sense than taking oil out of the strategic oil reserves.” READ MORE

Excerpt from Politico's Morning Energy: GET YOUR GOVERNMENT HANDS OFF MY GAS TAX: Vulnerable Hill Democrats are flirting with nixing the federal gas tax till the end of the year — and notably through the midterms — as a way to cool rising prices at the pump. But lawmakers with their eyes on infrastructure are dismissing the idea as utterly insane.

Pausing the gas tax would blow a “$26 billion hole in the Highway Trust Fund,” which is responsible for funding a spate of transportation infrastructure projects, House Transportation Chair Peter DeFazio said. The new investments under the bipartisan infrastructure package rely on $43 billion in gas tax revenues for this year alone, POLITICO’s Tanya Snyder reports. READ MORE