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OCTOBER
**6, 2022**
Dayen on TAP
The Political Impacts of Rising Gas Prices
Unexplained refinery shutdowns and snap decisions by oil-producing
nations can reverberate in the midterm elections.
I paid $6.29 a gallon for gas yesterday at what my wife and I call "the
cheap gas station." Prices in Southern California had gone up every day
for over a month, about $1.25 in all, before finally subsiding
yesterday. The average price is higher than the peaks of early summer,
before oil prices fell significantly. Gov. Newsom ordered a switch to
the cheaper "winter blend" a month before normal, which will take the
edge off somewhat. But unnamed "refinery problems" have been blamed for
the divergence between national and California prices, with real relief
expected sometime after
**November**. Hmm. There's nothing important happening in early
November where the psychological toll of high gas prices might make an
impact, is there?
Across the country, gas prices are rising again
,
in fact, and not necessarily in tandem with the price of oil. There as
well, refinery issues have been discussed as the cause. "Crack spreads
" (a measure of
the cost of refining) have climbed back up after decreases in August and
September. But capacity losses, some from a deadly refinery fire
in Ohio last month and a separate one at an even bigger refinery in
Indiana, seem to be the culprit. As Severin Borenstein explained to me
in
June, it's hard to differentiate between accidents or maintenance and
business decisions to goose the price. "It's easy for a company to
say, 'We're not intentionally restricting output, we have this
glitch,'" Borenstein said then.
None of this was helped by the OPEC+ decision yesterday to cut oil
production
by two million barrels per day in the coming months. The incredibly
unwise diplomacy from the Biden administration, fist-bumping with the
murderer of Jamal Khashoggi
,
led to absolutely nothing. But the real-world impact of this cut will be
muted. Many OPEC nations aren't hitting their quotas anyway, so some
of these "cuts" just reflect current realities. But the announcement
should add something like 15 to 30 cents
to the
average cost per gallon in the U.S.
That's bad news for the party in power right before the midterms,
given the effect of prices on the national mood. Candidates across the
country have attempted to blame high prices on corporate greed
,
and honestly the suspiciously timed refinery maintenance operations
should get a lot of attention here. But voters probably aren't
schooled in the ins and outs of unplanned refinery maintenance
announcements. They want to see results.
It's in this context that the Biden administration is preparing to
ramp down sanctions on Venezuela
,
allowing Chevron to pump oil there. But that has not been finalized, and
even if it is, turning the spigot on wouldn't have a major impact
overnight, though it would give oil markets a psychological lift.
The even broader context is the necessity of a national policy to end
the use of the internal combustion engine as soon as possible. Propping
up and/or begging authoritarian regimes for the petroleum within their
borders carries grave consequences, as does oil companies hijacking our
economy and national elections simply by shutting down a refinery.
There's an environmental imperative to finding a way out of these
dynamics, but we shouldn't discount the political imperatives as well.
~ DAVID DAYEN
Follow David Dayen on Twitter
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