On the first day of his presidency, Joe Biden signed an executive order cancelling the Keystone XL pipeline extension that would have brought oil from Canada to American refineries. Days later, he signed an executive order pausing federal drilling leases.
More is to come from Biden on the energy front, and they’ll all have the same effect in increasing the price of oil – which you’re likely already noticing at the pump.
On election day, the average price of gallon gas in the U.S. was $2.10, compared to $2.84 today, a 35% increase. Before the pandemic, the average person used roughly 656 gallons of gasoline per year, meaning that in just four months Biden has increased the annual gas expenditure of the average consumer by $485, or more than a third of his $1,400 stimulus check. Of course since that’s pre-pandemic the actual losses will be smaller, but miles driven has significantly rebounded from the pandemic lows, and will continue increasing as the country continues opening back up.
An obvious objection arises: how can anyone blame Joe Biden for an increase in gas prices from election day onward, as opposed to from inauguration day onward? As Unbiased America’s Kevin Ryan explains:
Because the price you pay at the pump is heavily influenced by futures contracts for oil, which are, as the name implies, influenced by where traders believe prices will be in the future. And when Joe Biden was elected in November of last year, the expectations for oil prices suddenly shifted dramatically upward, and with it, the price you pay at the pump, as the graph attached to this post shows.
And sure enough, some of his first actions as president included banning new oil drilling leases on federal property and putting an end to the Keystone pipeline, among other things.
While the Keystone pipeline extension that Biden cancelled wasn’t operational yet and thus its cancellation isn’t affecting supply and demand in the immediate term, the futures market can account for its impact in the long term. The same goes for the moratorium on oil and gas leasing – and the fact that Biden is tough on the oil and gas industry in general.
More importantly, the market sees these as merely the first step. Industry experts say they expect the government to stop renewing existing leases as well, as Biden seeks to fulfill his campaign pledge to stop all drilling on federal property to push the country to “transition away from the oil industry.”
Biden’s policies aren’t the only variable increasing prices, of course. Increased demand for oil as the economy recovers was always going to (and will continue to) send prices higher, though it doesn’t explain the entire rise. While the most recent data on total vehicle miles driven in the U.S. only exists through December 2020, miles driven (and thus demand) actually fell from October to December. Of course, we’ll have to wait until the data through February is in to make a more complete assessment.
Many strategists also predicted a weaker dollar under a Biden administration, which also could be pushing prices higher (as our gasoline exports being relatively cheaper from a weak dollar boosts demand for it).
If anything is clear, it’s that Biden’s policies aren’t helping.
UPDATE: An earlier version of this article read that the keystone pipeline wasn’t yet operational under Biden – language had been modified to clarify that it was the extension of the pipeline that is not operational. We greatly thank our fact checker overlords for alerting us that this clarification needed to be made, as if it wasn’t obvious from context.
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