CryptocurrencyInvestingBanksReal Estate

4 reasons high gas prices aren’t Joe Biden’s fault—and one critical way he’s adding to the problem

June 8, 2022, 9:00 AM UTC

As the summer travel season heats up, gas prices are soaring, and Americans aren’t happy about it.

The average price of a gallon of gas moved to a record high of $4.91 nationwide on Tuesday. That’s a 61% increase from a year ago and more than double what it was when President Biden took office in January 2021.

As a result of rising costs, seven in 10 Americans now say inflation is the most critical issue facing the nation, according to a recent Pew Research poll. And many blame the president for their rising cost of living, especially when it comes to the price of filling up at the pump.

He’s pushing back against the idea that he’s responsible, saying at a White House press conference last week, “The idea we’re going to be able to click a switch, bring down the cost of gasoline, it’s not likely in the near term.”

But just 27% of voters say they approve of the president’s handling of rising gas prices, according to a new ABC News/Ipsos poll. So who’s right, the president or voters?

The policies of the executive branch can undoubtedly play a role in the price of gas, and Biden is just the latest in a long line of presidents to be blamed for rising costs at the pump, but experts say there’s more to the story.

And Biden has been trying. He ordered a record-setting release of 180 million barrels of oil from the Strategic Petroleum Reserve (SPR) in late March and has been pushing to get producers to increase supply, but thus far, he’s been unable to quell rising energy costs.

“I think the president gets wrongly blamed for most of the increase in gas prices,” Patrick De Haan, head of petroleum analysis at the real-time fuel-pricing app GasBuddy, told Fortune. “Much of why we’re paying higher prices today has less to do with Biden and more to do with COVID, Russia, and other issues.”

Industry experts agree on three huge factors behind the recent rise in gas prices, but they’re split on a fourth, and De Haan argues Biden is contributing to the problem with what he calls an “open hostility” toward the oil and gas industry.

1. A pandemic-induced supply and demand mismatch

One of the key culprits in the rise in U.S. gas prices over the past few years is the now familiar pandemic-driven mismatch of supply and demand.

At the start of the COVID-19 outbreak, demand for oil and gas plummeted as millions around the world lost their jobs and were unable to travel.

Diminished demand caused oil companies to curtail their production, but then, when vaccines allowed the economy to reopen, demand rebounded faster than expected, albeit not all the way to pre-panemic levels.

Suppliers weren’t ready for the new normal, which created a supply-demand mismatch leading gasoline prices to rise.

“A lot of the imbalances in the market were started because of the abrupt shift in consumer behavior during the pandemic,” De Haan said. “In 2021, oil companies started to increase production again, but given a lot of the supply-chain kinks that developed and the fact that they had laid off thousands of workers, they weren’t in a position to instantly turn that capacity back on.”

From January to May of 2021, gas prices soared 70 cents to top $3 per gallon nationwide, and that was all before the global energy market was hit with another unexpected hardship—Russia’s invasion of Ukraine.

2. The war in Ukraine and a European energy crisis

In 2021, Russia was the world’s third-largest oil producer and the second-largest producer of natural gas, according to the International Energy Agency.

Even though the U.S. imported only a tiny fraction of its energy needs from Russia last year, the interconnected nature of the global energy market led U.S. gas prices to surge after the Ukraine war began and Russian supplies were affected—and sanctions only made things worse.

At first, the U.S. and EU were reluctant to ban Russian energy imports, but on March 8, President Biden signed an executive order banning the import of Russian oil, liquefied natural gas, and coal. And on May 30, EU officials said they would cut 90% of Russian oil imports by the end of the year.

For the U.S., cutting off Russian energy wasn’t a major issue, but the EU’s aggressive pursuit of a green energy strategy that involves a transition away from coal, nuclear, and natural gas by 2050 has made it increasingly reliant on Russian natural gas.

This lack of alternatives to Russia led Europe into an energy crisis like never before after the war, and the effects were global.

Jay Hatfield, chief investment officer of Infrastructure Capital Management, told Fortune that the high cost of natural gas in particular caused many power plants in Europe to switch fuels. This meant that U.S. oil producers could get better margins by shipping their products to Europe instead of selling them domestically. 

As a result, nearly three-fourths of all the U.S.’s liquefied natural gas was sent to Europe in the first four months of 2022, driving U.S. gas prices higher. So while Biden is blamed by many for the current sky-high prices at the pump, Europe’s energy crisis may be the key factor driving price increases.

“Biden didn’t help the problem, but he didn’t create it either,” Hatfield said. “I think the primary blame lies with the Europeans because they were way ahead of us in pursuing what I think is a failed strategy, which is to think that you’re going to immediately and rapidly transition to wind and solar. That’s just not physically possible.”

Hatfield argued that if Biden had followed a similar policy of rapidly phasing out natural gas and other energy alternatives, gas prices would be far worse.

3. Challenges increasing production

Another factor affecting gas prices over the past year has been challenges in increasing production.

Energy Secretary Jennifer Granholm told CNN last week that she had expected oil and gas companies to increase their output more than they have amid record prices.

“We want them to increase production so that people are not hurting,” she said. “It is extremely frustrating to see that there’s not a full-on return to production at the moment of crisis.”

But economists at the Federal Reserve Bank of Dallas argued in May that production increases won’t solve the problem of high gasoline prices in the near term.

“Even under the most optimistic view, U.S. production increases would likely add only a few hundred thousand barrels per day above current forecasts,” they wrote. “This amounts to a proverbial drop in the bucket in the 100-million-barrel-per-day global oil market.” 

Oil and gas companies are also reluctant to make longer-term investments to increase production amid an ongoing clean energy transition, and a lack of infrastructure is becoming a problem in the industry, experts say.

4. Price gouging?

Biden has also blamed “price gouging” for some of the recent increase in gas prices, arguing that oil and gas companies shouldn’t “pad their profits” at the expense of Americans in a March tweet.

The president pointed to record profit margins from oil and gas companies that are driving gas price increases, and he may have a point.

Refining margins represent around $1 of the current run-up in gasoline prices, according to Hatfield. The problem is that oil companies, unlike retailers, don’t get to set the price for their product. 

“Oil companies are price takers, they’re not price setters,” De Haan said. “They don’t get to decide prices, they sell at the prevailing market price, which is born out of supply and demand.”

De Haan made the comparison to the housing market, asking the question: “Am I price gouging if I sell my house at the prevailing market price?”

Still, oil companies could use their excess profits to expand their production, and they aren’t. Instead Exxon, Chevron, BP, and Shell spent more than $44 billion on stock buybacks and dividends in 2021.

How Biden isn’t helping

Biden does bear at least some blame on the production side, however, according to Hatfield, who flagged his decision to cancel the Keystone XL pipeline as a key factor.

“What a lot of people don’t appreciate is canceling one pipeline is really canceling all the pipelines,” Hatfield said. “Because we need federal government support to get pipelines done in the United States, there’s always going to be tremendous local opposition, so if the federal government is not behind you, then you’re definitely not going to get any pipeline built.” 

Hatfield also said that it is “nearly impossible to build a new refinery in the United States” owing to stiff regulation, which makes it more difficult for oil companies to increase production. 

When asked what could be done to lower gas prices moving forward, both Hatfield and De Haan argued the president should give oil companies more clarity on the future path of the industry so they can increase production without fear of losing money on their long-term investments.

While that may not help with the current pain at the pump, it would lead to lower prices over the long haul.

Hatfield added that deregulation and tax incentives would have been used in the past, but he argued the chances of President Biden using those tactics are “absolutely zero” given his clean energy goals.

“President Biden could be doing more,” De Haan concluded. “But again, he’s really just a small piece of the puzzle.”

And despite sharing some criticisms of Biden, Hatfield said he agrees with the Federal Reserve Bank of Dallas that increasing U.S. oil supply wouldn’t be very helpful for consumers in the near term. “That’s not really the primary driver of oil prices,” he said.

Are you a single adult who lives alone? Fortune wants to hear how inflation is affecting your budget. Email reporter Alicia Adamczyk to share your story for a future article.