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Biden Administration Continues Efforts to Curb Gasoline Prices

SVP Government Affairs Tim Tarpley
Tim Tarpley, SVP Government Affairs & Counsel

Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley

The Department of Energy continues to move forward on its plans to liquidate portions of the Strategic Petroleum Reserve (SPR) in an effort to stabilize and lower gasoline prices in the U.S. DOE said on November 10 that it would release nearly five million barrels of oil from the SPR to ExxonMobil and will set the sale next week for another 18 million. The delivery of 4.8 million barrels to XOM will be done via a swap agreement that requires XOM to replace the oil at a later date by delivering its own supplies to the reserve. 

The move comes at a time when the Biden Administration continues to try and fight public perception that their policies have partly led to an increase in gasoline prices and encouraged inflation. The administration appears to also be avoiding taking any foreign policy positions that could cause additional supply constraints or price increases.

Following a discussion with Russian President Vladimir Putin, who currently appears to be massing over 100,000 troops on the Ukrainian border in anticipation of a potential invasion, the Biden Administration made it clear that (at least initially) they do not plan to include a block on Russian exports of crude oil should Russia actually invade Ukraine in the coming months. This is a significant statement, because in 2020 oil, gas and related products made up 42.1% of Russian exports. Should an invasion occur, the U.S. and Western Europe would be put under tremendous pressure to curb these exports in an effort to attempt to curtail further Russian aggression.  

In related news, the Biden Administration continues to push a narrative looking to deflect themselves from any responsibility for the rise in gasoline prices. Speaking to an advisory group of oil executives on Tuesday, Department of Energy Secretary Jennifer Granholm stated “By and large the issues around current production do not stem from decisions made by the Biden Administration. I understand you may disagree with some of our policies, but it does not mean that the Biden Administration is standing in the way of your efforts in meeting current demand.” Also during this speech, the Secretary stated there are currently no plans to curb oil and gas exports in an effort to boost domestic supply. 

Senate Continues to Change ‘Build Back Better,’ But Future Remains Murky

The “Build Back Better” package continues to languish in the Senate with Sen. Joe Manchin (D-WV) remaining the most significant holdout. The Senator is expressing concerns with the variety of budget gimmicks used by drafters of the legislation to get around his demand that the bill cost no more than $1.5 trillion dollars. Considering the 10-year cost of extending the child tax credit could be $1 trillion in itself, the math is proving to be a major factor.

Sen. Manchin had what he called a “productive” conversation with President Biden this week but no final deal has been struck. Given that Senate leadership continues to push a Christmas deadline for a vote, they may soon be forced to either call Sen. Manchin’s bluff and bring the bill to the floor for a vote, or push potential passage into next year. Given the political calendar, if they choose the latter, the chances of passage will continue to decline as time moves forward.

Late breaking reports this week have indicated that the proposed methane fee, one of the provisions that we have been watching closely, is continuing to be negotiated between Sen. Manchin and Senate leadership. While we have not seen actual legislative text yet, reports are that the Senate Democrats plan to keep the incentive/fee framework of the House-passed version, but it will offer more incentives and allow for a slower phase-in period before the financial penalties are imposed.  

Reports also indicate that the bill would also focus penalties on operators of wells that aren’t in compliance with EPA methane regulations. This provision is meant to satisfy concerns expressed by Sen. Manchin and others that the methane fee provision would be duplicative considering that the EPA is also working through the introduction of a new methane regulation. As a reminder, the House-passed methane fee would begin at $900 per ton for emissions reported in 2023 and increase to $1,500 in 2025. That measure also includes $775 million for grants, rebates and loans available to operators to help them deploy technologies to stop methane leaks.

Additionally, it appears that Sen, Manchin, who leads the Senate Energy Committee, has come to an agreement for support on the level of royalties for oil and gas operations on federal lands and waters. Draft text was leaked yesterday which would increase royalties on both onshore and offshore production, although the rates would increase less than the package that passed the House. The draft maximum rate rises to 16.75% from the current 12.5% for oil and gas produced onshore, and offshore royalties would be set at no less than 14%, compared to the current 12.5%.

Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Council’s newsletter, which highlights sector-specific issues, best practices, Council activities and more.


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