(Bloomberg) — President Joe Biden is under intensifying pressure to keep a lid on rising gasoline and natural gas prices that threaten the economic recovery and Democrats’ political ambitions.
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But he has little power to control global energy markets.
“The toolbox is actually pretty limited,” said Kevin Book, managing director of research firm ClearView Energy Partners. “The U.S. government doesn’t have the ability to move earth and molecules any faster than the private industry that is responsible for producing energy.”
Moreover, some options — from tapping the nation’s emergency oil stockpile to banning natural gas exports — clash with the president’s green agenda and could anger European allies. Other tactics commonly used to fill supply gaps after natural disasters are of little use to combat price spikes.
Rising motor fuel prices pose a political risk to any U.S. president. But Biden has added reason to worry, as high energy costs and rising inflation threaten his bid to nurture an economic rebound from the pandemic and enact major social-spending and infrastructure legislation.
White House officials reiterated this week that the administration will use all tools at its disposal to restrain gasoline prices, which are the highest they have been for this time of year since 2014. “We will continue to look for ways to relieve the burden of energy costs on American families,” White House spokeswoman Karine Jean-Pierre told reporters aboard Air Force One on Thursday. However, she added, “There is no plan to take action at this time.”
Here’s a look at some of Biden’s options.
Tapping emergency stockpiles
Biden could tap into the country’s emergency stashes of crude and refined petroleum products. It’s a tried and true tactic; former President Barack Obama withdrew some 30 million barrels of crude amid supply disruptions in Libya a decade ago, and former President Bill Clinton used the same strategy to tamp down prices months before the 2000 presidential election.
The Energy Department is already obligated by law to sell 260 million barrels of oil in the Strategic Petroleum Reserve by fiscal year 2027. Additional releases now could slightly lower prices, analysts say, though the effects would be temporary.
Corralling crude exports
Although Congress in 2015 lifted a ban on most U.S. crude oil exports, Biden could invoke emergency powers to reinstate restrictions.
Oil industry allies and analysts warn the move could backfire by inviting retaliation by other countries and harm oil-producing states represented by Democrats in Congress.
“The export market has been a primary driver of investment in U.S. energy supply, and deterring that could actually raise energy prices in the medium term,” Benjamin Salisbury, director of research with Height Capital Markets, said in a research note.
Moreover, U.S. prices for oil and gas would still be linked to a world market even if the U.S. isn’t actively exporting them.
“Oil is a global commodity,” said Frank Macchiarola, a vice president at the American Petroleum Institute, an industry trade group. “Limiting the exports of energy and the transit of energy will not address the underlying issues that we’re facing with energy markets today.”
Curbing LNG cargoes
Manufacturers, chemical makers and other companies that rely on natural gas for heat and power are already imploring the administration to curtail exports as European supply concerns push up prices.
Under the Natural Gas Act, the Biden administration has the authority to restrict exports if it determines they are not within the nation’s best interest. And even before European energy woes drew scrutiny to gas exports, environmentalists were pressuring the Energy Department to reject new applications to export LNG.
But any move to cut off LNG exports as Europe braces for winter could be seen as the U.S. turning its back on allies.
“It’s pretty hard to qualify $6 gas as a national emergency,” said Charlie Riedl, executive director of the Center for Liquefied Natural Gas, which represents exporters such as Cheniere Energy Inc. and Sempra Energy. “We are producing more gas than we are using right now.”
Shifting energy flows
The president could limit the movement of oil, gas and petroleum products by pipeline, rail, barge or ship by drawing on other emergency authority to coordinate domestic transportation that was created in the wake of the Sept. 11, 2001 terrorist attacks.
The power, which would be wielded by the head of the Transportation Security Administration, could be used to block fuels from leaving U.S. ports or shift energy to regions with high prices.
Waiving the Jones Act, which requires the use of American ships to move goods among U.S. ports, is unlikely to have much of an impact now.
The administration could speed up the permitting of drilling projects and the sale of leases in Western states, where Biden paused auctions in January. In response to a federal judge’s order, the Interior Department is set to auction Gulf of Mexico leases next month, but sales of onshore tracts currently aren’t expected until early next year.
Leases sold today wouldn’t immediately yield oil. In U.S. waters, it can take five to 10 years after a lease sale for companies to find oil, drill exploratory wells and begin production. Still, a rush of new auctions would have immediate signaling value to a market that has grown to expect the Biden administration will curtail oil and gas development as part of the president’s push to green the U.S. energy system.
While past presidents have responded to high energy prices by seeking to boost oil production, “they weren’t constrained by environmental objectives toward the reduction of greenhouse gases,” Book said. “The Biden administration is, and they’re playing with an even smaller toolkit because of that.”
Waiving fuel rules
When storms pinch gasoline supplies, the U.S. government sometimes has allowed fuel refiners and distributors to sell less-expensive blends.
Now, the administration is facing pressure to ease requirements for biofuel to be blended into diesel and gasoline. Experts disagree about the extent to which those Renewable Fuel Standard requirements affect gasoline prices, but refiners argue reductions would provide an immediate balm.
“Crude oil costs — largely a product of global supply — are the number one driver of gas prices at the pump, but policy is making things worse,” the American Fuel and Petrochemical Manufacturers association said in an emailed statement.
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