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Biden Buries Restrictive Lease Plan Under Holiday Weekend

July 6, 2022 by Leave a Comment

President Biden’s Department of Interior released its draft offshore lease plan late on  July 1—just before the Fourth of July holiday, as American families were paying historically-high gasoline prices for their travels.  The plan is required by law and a final plan was due by June 30, when the current plan ended. The draft plan lays out several options for public input regarding the number of offshore oil and gas lease sales that should be held over the next five years, ranging from zero to eleven. In total, the draft plan has ten potential new leases in the Gulf of Mexico and one in the Cook Inlet off the southern coast of Alaska. There are no new leases in federal waters off the Atlantic and Pacific coasts. Biden’s plan is in sharp contrast to President Trump’s proposed offshore lease plan that had 47 new offshore drilling leases, including in the Atlantic and Pacific oceans. President Trump had proposed a vast expansion of drilling sales to cover more than 90 percent of coastal waters, including areas off California and new zones in the Atlantic and Arctic. The earliest Biden’s offshore lease program could be finalized is likely late fall.

President Biden claims he is doing all he can to bring down gasoline prices, but he does not offer up what counts—providing a means to obtain new domestic oil supplies or ending his official policies to “end fossil fuels.” Instead, he canceled the Keystone XL pipeline, uses up emergency oil supplies in the Strategic Petroleum Reserve, begs OPEC to boost production, demands refiners to raise output when they are already producing at high rates, calls on oil companies to expand production under existing leases, and asks Congress to approve a gasoline tax holiday. All of this is in an effort to convince Americans that he is doing all that he can without making any sizeable contribution to gasoline prices that were less than half their recent high when Biden took office.

That’s because Biden does not want to increase domestic production. Instead, he prefers we import oil from OPEC, Iran or Venezuela. In fact, Biden vowed to suspend all new federal drilling on public lands and waters, but had to change that position when legal challenges from several states and oil companies resulted in a judge indicating that he did not have that power. It is also not because he is keeping federal waters pristine since he is pushing for offshore wind, despite the fact that hurricanes can affect them as well and cause unwanted materials to land in U.S. waters. Biden wants 30 gigawatts of offshore wind turbines in federal waters by 2030. To reach that goal, the Biden administration recently launched a partnership with a half dozen state governors to accelerate offshore wind along the East Coast—an area forbidden to oil leases.

Biden Has Held One Offshore Lease Sale

The Interior Department’s most recent offshore oil and gas auction was in November in the Gulf of Mexico. Shell, BP, Chevron and Exxon Mobil offered $192 million for the rights to drill on 1.7 million acres of oil and gas leases in the November 17 lease sale. However, a court order later vacated the sale, arguing that the administration did not adequately account for the climate effects of the oil and gas consumption that would result from the lease sale. The Biden administration did not appeal the decision, which is not surprising because they only held the sale after being ordered to by another federal judge.

Instead, the Interior Department canceled 3 oil and gas lease sales in the Gulf of Mexico and Alaska’s Cook Inlet. According to the Interior Department, the Cook Inlet lease sale did not proceed due to insufficient industry interest and the planned sale of two leases, lease 259 and lease 261, in the Gulf of Mexico did not proceed due to contradictory court rulings on the leases. The Alaska lease would have covered more than 1 million acres that would provide oil for 40 or more years of production. These cancellations came when the national average price of regular gas hit a high of $4.418 a gallon, and with the CPI increasing almost 15 percent since Biden took office.

Conclusion

Under federal law, auctions of offshore oil and gas drilling rights can only be held under the formal five-year plans. It is clear congressional law that directs the Interior Department to expeditiously lease the Outer Continental shelf: “the outer continental shelf is a vital national resource reserve held by the Federal Government for the public, which should be made available for expeditious and orderly development subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs.”

The Biden draft plan is an initial but tentative step in the process, and appears to be the minimum possible movement to hold off a lawsuit regarding their failure to follow the law. Following a 90-day period for public comment, the Bureau of Ocean Energy Management will put together a proposal for the final program for the Interior Secretary to review and approve within a minimum of 60 days. Biden’s final program, however, may not actually authorize any lease sales, which would be to the detriment of the American public, who actually owns U.S. federal lands and waters and depends on oil for 36 percent – the largest percentage – of its energy supply.

As API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola said, “Because of their failure to act, the U.S. is now in the unprecedented position of having a substantial gap between programs for the first time since this process began in the early 1980s, leaving U.S. producers at a significant disadvantage on the global stage and putting our economic and national security at risk.”

*This article was adapted from content originally published by the Institute for Energy Research.

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Will America Learn From Europe’s Energy Failures?

July 1, 2022 by Leave a Comment

Russian natural gas supply to Europe via the Nord Stream 1 pipeline capacity fell to 40 percent recently as Russia cut flows awaiting the return of equipment sent to Canada for repair and warns that more delays in repairs could lead to cutting all flows, putting additional strain on Europe’s ability to refill its natural gas inventories and raising prices by 40 percent. Gazprom, the state-controlled gas company, indicated that Western sanctions made it impossible to secure the return of equipment from Canada for the pipeline’s Portovaya compressor station. Built as the world’s longest subsea pipeline during Barack Obama’s presidency, Nord Stream 1 has the capacity to pump about 55 billion cubic meters annually to the European Union, which last year imported about 140 billion cubic meters of gas from Russia via pipelines. Germany’s gas inventories, for example, are 52 percent full and need to be 80 percent full by October and 90 percent full by November.

Also affecting gas inventories in Europe is U.S. LNG production, which has provided Europe with LNG imports to help with their reductions from Russia. Europe accounted for 74 percent of U.S. LNG exports in the first four months of 2022. However, an explosion on June 8 hit the Freeport LNG facility in Texas, resulting in a fire that caused the plant to be taken offline until September when part of the facility will be operating again with full operation set to resume at the end of the year. The Freeport facility was a major supplier of LNG to Europe and accounts for about 20 percent of U.S. LNG exports. That timeline for the Freeport facility to come back online could be delayed because regulators must approve the facility’s restart and two investigations are ongoing into the cause of the disruption at the plant. Additionally, the Federal Energy Regulatory Agency is investigating whether to require that LNG projects include estimates of climate impacts, which could also affect permitting and timing of repairs.

Germany’s Dependence on Russian Energy

Germany for decades had bet that economic interdependence with Russia would keep peace in Europe and that Russia could be trusted as a supplier of energy. President Trump even warned Germany of its growing dependency, which led Germany and their friends in U.S. media to scoff at his prescient prediction. Russia’s invasion of Ukraine changed that and vindicated Trump’s view.  Germany had relied on Russia for more than half of its gas imports, a third of its oil and half of its coal imports. Germany is now taking steps to make itself independent from Russian coal by the end of summer, and from Russian oil by the end of the year. The share of oil imports from Russia has fallen to 20 percent, and Russian coal imports have been halved.

But, reducing its dependence on Russian natural gas will be harder to achieve, possibly taking two years. Germany imports about 35 percent of its natural gas from Russia, down from 55 percent before the war, using most of it for heating and manufacturing. Last year, power generation using natural gas accounted for about 15 percent of the country’s electricity. Germany plans to restart coal-fired power plants it has been closing because of its “Green Transition” and to offer incentives for companies to reduce natural gas consumption so households do not run out of gas this coming winter. The legislation affecting the use of coal is expected to be approved on July 8 in the Bundesrat, the upper house of parliament, and will expire on March 31, 2024. The German government is also expected to introduce an auction system that would motivate industry to reduce gas consumption, which will begin this summer. The steps are part of a broader strategy aimed to reduce gas consumption and divert gas deliveries to storage facilities to ensure that the country has enough reserves to get through the winter.

Other European Dependence on Russian Gas

Both the Czech Republic and Austria are among Europe’s most vulnerable countries when it comes to Russian natural gas, relying on Russia for almost all their natural gas supplies. The Czech Republic’s main gas provider, CEZ, reported that its supplies from Gazprom had been reduced to about 40 percent of its usual volume, and the country’s reserves could last until the end of October. Austria’s OMV energy company was also cut. Italy, which imports 95 percent of its gas, buys 40 percent of it from Russia. Gazprom’s supply to Italy also fell due to the reduced flows through the Nord Stream 1 pipeline connecting Russia to Germany. But Italy, which benefits from milder winters than its northern neighbors, is in a better position to attract alternative supplies via pipeline and by ship. Italy was proposed to be a recipient of natural gas from Israel and Cyprus via the East Med pipeline, however, the Biden administration withdrew its support for the pipeline shortly before Russia invaded Ukraine.

In Holland, the government declared an “early warning” stage of a natural gas crisis, a move that will allow more electric power to be generated by burning coal. According to the Dutch government, there were as yet “no acute gas shortages” in the Netherlands but declining supplies “could have consequences.”

Europe’s Gas Storage Inventory

European member states together have 1,100 terawatt-hours—or around 100 billion cubic meters—of storage capacity spread across about 160 underground facilities in 18 countries. The stored fuel typically covers 25 percent to 30 percent of winter demand. More than 70 percent of that underground capacity is concentrated in Germany, Italy, Austria, the Netherlands and France. To ensure winter supplies, European officials agreed on requiring E.U. underground reservoirs to reach 80 percent by November. If they stay at current levels, Europe will struggle to reach 70 percent of storage capacity by then, and a cold winter could turn catastrophic for energy consumers.

Source: Wall Street Journal

Conclusion

Europe is dependent on Russian energy, particularly natural gas. And due to Russia’s invasion of Ukraine, Europeans are trying to reduce that dependence quickly. But, the goal is proving hard to achieve, particularly when the continent wants to transition from fossil fuels as part of its commitment to reduce carbon dioxide emissions. Politicians in Germany are keeping idled coal plants up and running and planning to auction natural gas to industry to try and reduce gas consumption. Europe’s natural gas storage facilities are currently just over 50 percent fuel and they need to get that to 80 percent by November. But, Russia’s reduction of gas flows to Europe via the Nord Stream I pipeline is making it difficult to fill those reservoirs to that level.

Energy is serious business for national security and economies, industrial production, jobs, and life itself.  Europe’s commitment to intermittent and unreliable “part-time” green energy is exposing all of these realities and should be providing U.S. policymakers the proof of the pitfalls of this course of action.  Unfortunately, there are no signs the Biden administration is concerned about the destabilizing nature of unreliable energy.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #90: Natural Law

June 30, 2022 by 1 Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss Team Biden’s latest ideas on how to tackle inflation, energy prices, and the crisis in Europe, as well as the latest round of decisions from the Supreme court.

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Supreme Court Denies Broad EPA Authority To Regulate Greenhouse Gases

June 30, 2022 by Leave a Comment

Chief Justice Roberts Writes for a Six-Justice Majority in West Virginia v. Environmental Protection Agency

WASHINGTON DC (06/30/2022) – Today, the Supreme Court decided West Virginia v. Environmental Protection Agency. Chief Justice Roberts wrote the Court’s opinion concluding that the EPA lacks broad authority to regulate greenhouse gas emissions from power plants under the Clean Air Act.

AEA Director of Policy and Federal Affairs Kenny Stein issued the following statement:

“The Court’s decision today merely confirms what AEA and other critics of the Clean Power Plan have long pointed out: prior to the Obama administration, section 111(d) of the Clean Air Act had never been construed to grant EPA the power to remake the nation’s electricity system. The 2015 ‘discovery’ of this vast power was clearly an attempt to rewrite the CAA to give EPA the power that Congress had declined to give it. The Court correctly notes that vast regulatory authority must be expressly given by the people’s representatives in Congress. The Biden administration should take this message to heart and abandon its ‘whole of government’ regulatory adventurism.”

AEA President Tom Pyle issued the following statement:

“From the start, the Clean Power Plan was all about the administrative state waging war on reliable and affordable energy sources. The Court’s decision today makes it clear that the EPA, as well as other regulatory agencies, do not have sweeping authority to reorder the entire U.S. power sector under the Clean Air Act.

This decision is also critical for democracy. Congress, as the People’s democratically elected representatives, needs to authorize regulatory agencies to act. If President Biden wants EPA to act on climate, then it is time for President Biden to craft a plan and have Congress vote on it. Now, the American people can decide this issue through their elected representatives in Congress, as the Constitution envisioned.”

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Biden Works To Cut Off Domestic Energy Supplies Even As Court-Mandated Lease Sales Begin

June 29, 2022 by Leave a Comment

The Energy Information Administration (EIA) forecasts that nine new fields will come online in the deep waters of the Gulf of Mexico this year, which will account for 5 percent of natural gas production and 14 percent of oil production in U.S. federal Gulf of Mexico waters by the end of 2023. However, EIA expects that the additional capacity from these new fields will not sustain oil production at levels similar to the end of 2021 in offshore fields. According to EIA, declining production from existing Gulf of Mexico fields will largely offset the increases in oil production from the new fields, with natural gas production in the Gulf of Mexico continuing its three-year decline. During 2021, 15 percent of U.S. oil production and 2 percent of U.S. natural gas production was produced in the Gulf of Mexico.

The Biden administration has not had a successful offshore lease sale since Biden’s inauguration—lease sales that are required by federal law—because the only offshore lease sale held in November 2021 was invalidated by a federal judge a few months later. The Biden administration has not contested the judge’s decision, which was that climate change was not adequately considered in the sale. In fact, the Biden administration only held the sale after being ordered to do so by another federal judge.

Earlier this year, the Biden administration canceled lease sales in federal waters off Alaska’s Cook Inlet, citing a lack of industry interest. On top of those actions, the Biden administration has yet to provide an offshore lease plan for new oil and gas leases in federal waters that is required by law every 5 years.  The Department of Interior indicates that a draft of one will be provided by June 30, 2022, but will include an option of no lease sales. The Biden administration continues to withhold oil and gas supplies from the American public.

Source: Energy Information Administration

EIA Gulf of Mexico (GOM) Forecast

EIA expects that GOM natural gas production will average 2.1 billion cubic feet per day in 2023, down 0.1 billion cubic feet per day from 2022 and that GOM oil production will average 1.8 million barrels per day in 2023, about the same as in 2022. There are no GOM fields scheduled to start production in 2023. The nine fields coming online in 2022 include those at Argos/Mad Dog 2, Vito, Lobster, Dome Patrol, Olympus, Taggart, and the Kings Quay fields.  The large development fields at Argos/Mad Dog 2, King’s Quay, and Vito each has a peak production capacity of at least 100,000 barrels of oil equivalent per day. Eight of the nine new fields in the GOM will produce both oil and natural gas by year-end and the ninth field will produce only oil. Offshore producers have made significant progress simplifying and standardizing floating production systems and collaborating with various partners, including overseas construction services companies, to reduce costs and remain competitive with onshore producers.

Source: Energy Information Administration

Since the late 1990s, new development in the GOM has been targeting oil-bearing reservoirs. Most of the natural gas produced in the GOM comes from associated-dissolved natural gas production in oil fields instead of natural gas fields. In 2020, gross withdrawals of natural gas in the GOM that came from natural gas wells accounted for less than 30 percent of total GOM natural gas production, compared with 76 percent in 1999.

Required Offshore Lease Plan

Shortly after taking office, President Biden signed an executive order to pause the issuing of new leases, but a successful legal challenge from western states forced the administration to hold new lease sales. The new offshore lease plan, however, is likely to block new drilling in the Atlantic and Pacific oceans; the eastern Gulf of Mexico has been closed to drilling since 1995. At issue is whether to allow lease sales in parts of the Arctic Ocean as well as the western and central Gulf of Mexico. During his campaign, Biden pledged to end new drilling on public lands and in federal waters. The draft five-year plan for the National Outer Continental Shelf Oil and Gas Leasing Program is expected to include several options, including a “no action alternative” — that would not offer any new lease sales.

Areas made available for leasing under the new plan would be auctioned through 2027. Once the Interior Department’s Bureau of Ocean Management releases the draft five year plan, it will be subject to a period of public comment before it is finalized.

According to Erik Milito, president of the National Ocean Industries Association, new leases in the Gulf of Mexico could mean an additional 2.4 million barrels of oil a day, which can impact the global marketplace. For example, oil prices dropped by over $9 a barrel in 2008 when President George W. Bush opened the Outer Continental Shelf to oil drilling, signaling he wanted more supply to be produced. Biden could get similar results if he truly wanted more investment in oil production and made a proposal that clearly showed it. Instead, Biden has offered a temporarily pause on the federal gas tax that needs to be approved by Congress, released oil from the strategic petroleum reserve, and suspended a ban on summertime sales of ethanol-gasoline blends. None of these actions encourages new oil development or produced a single barrel of new oil production.

Recent History of Offshore Leases

Both the Obama/Biden and the Biden/Harris administrations have tried to block new offshore production. President Obama banned drilling in portions of the Arctic Ocean’s Beaufort and Chukchi Seas, and later invoked an obscure provision of a 1953 law, the Outer Continental Shelf Lands Act, to also ban drilling in areas along the Atlantic coastline. President Trump tried to open all coastal waters of the United States to oil and gas drilling, including the areas kept off limits by the Obama administration, but was unable to make that happen.  Due to pressure from coastal states, President Trump signed an executive order that prohibits drilling for 10 years off the coasts of Florida, Georgia, South Carolina and North Carolina. This, unlike Biden’s actions, happened at a time of low oil prices because of the huge increases in production the United States enjoyed on its way to energy independence reached in 2019.

President Biden signed a pause on drilling on federal lands and waters during his first weeks in office, calling for a review of the program that ended up increasing royalties for onshore production by 50 percent and also increasing rents. New onshore royalties will be 18.75 percent, matching those for offshore which were hiked by the Obama/Biden administration. President Biden in his 17 months in office has not had a successful offshore lease sale and all indications is that he would like to continue in that direction.

Conclusion

According to EIA, declining production from existing GOM fields is expected to be greater than the increase in production from new fields for natural gas and to be equal for oil. With no new fields coming on line in 2023, offshore oil production may decline as natural gas production is doing in the GOM. And with a hold on leasing federal lands and waters the share of energy produced from those areas will continue to lag the production from state and private lands.

Biden’s Interior Department is supposed to release a 5-year lease plan by the end of this month that will include a no lease sale option despite the plan and lease sales being required by law. Biden and his administration clearly do not want to encourage investment in new offshore oil fields and are doing everything possible to decrease production, contrary to what they state.  Cutting off domestic energy supplies and begging foreign nations to produce more oil seems to be the Biden administration’s policy.

*This article was adapted from content originally published by the Institute for Energy Research.

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Even After Russian Invasion, Biden Slow Walks Lease Sales

June 27, 2022 by Leave a Comment

Between August 2021 and February 2022, President Biden’s Bureau of Land Management’s approval of drilling permits was low, averaging about 200 per month. After Russia invaded Ukraine, however, the approvals picked up with 473 approved in March and 357 approved in April. Those approvals were still much less than the 600+ approved in April and May 2021. And, there is still a large number of pending permits: over 4,400. Biden’s call on U.S. oil and gas producers to drill more — and his ban on Russian oil imports — focused attention on the administration’s handling of the federal oil program, which constitutes 22 percent of the national supply. It appears Biden directed Interior Secretary Haaland to pick up the pace of permitting to mollify the political pressure rising along with pump prices.

Source: Bureau of Land Management

Receiving a permit to drill is a necessary step for oil and gas companies to undertake once they have purchased a lease. However, the determination to drill depends on many factors including finances, local regulations, the availability of materials such as steel, and worker availability. Workforce availability and supply chain issues are currently obstacles to oil field development, as they are in many other industries. Also, given that the Biden administration has said repeatedly that its policy is to end drilling on federal lands, the oil and gas industry is “skeptical” regarding the true nature of the approvals and whether further investment is in their economic interest. This is particularly true since the Biden administration has increased royalty rates from 12.5 percent to 18.75 percent and cut about 80 percent of the acreage proposed by industry during environmental reviews ahead of proposed onshore lease auctions.

Status of Onshore Lease Sales

The Biden administration has yet to hold a single onshore lease sale. In April 2022, the Department of the Interior announced it would proceed with six oil and gas lease sales as part of a reformed federal leasing program that reduced land available by 80 percent and increased royalty rates for drillers. The lease sales were being held because of a June 2021 federal court ruling blocking Biden’s attempted “pause” on all new leasing, where the judge indicated that Congress had ordered the lease sales and Biden was violating the law.

The Biden administration was supposed to hold its first onshore oil and gas lease sales in Wyoming and several other states in June. It has postponed some of those sales, in fact, more than once. The date for three lease sales slated for New Mexico, Colorado and Wyoming is now supposed to take place at the end of June, a year after the Court order them to be held. The Bureau of Land Management (BLM) originally scheduled the New Mexico and Colorado sales for June 16 and the Wyoming sale for the week after. According to BLM, “The date for this sale has shifted slightly to complete the analyses required under the National Environmental Policy Act and allow time for protest resolution.” In addition, earlier this month, a separate oil and gas lease sale in Nevada scheduled for June 14 was delayed two weeks. Two other lease sales set for June 28 in Utah and Montana have so far not been pushed back.

Conclusion

Since taking office, Biden has canceled the Keystone XL pipeline, rolled back drilling in Alaska’s Arctic National Wildlife Refuge, canceled drilling in the Naval Petroleum Reserve—Alaska and pushed for green energy subsidies, while increasing fees on the oil and gas industry. His “pause” on leasing on federal lands was overturned by a federal judge, but as yet no onshore lease sales have been held in 18 months of the Biden administration. With one week remaining in June, squeezing in six oil and gas lease sales may be a difficult task, or maybe there will be further delays based on protests from environmentalists that have already delayed several lease sales. Delays and uncertainty about political risk are known to drive investment capital away from projects. Between the Administration’s mixed messages and their friends in the Green Movement’s repeated litigation, businesses are less likely to invest in federal land production of the oil and gas the Biden Administration argues it wishes to increase.

*This article was adapted from content originally published by the Institute for Energy Research.

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Biden “In Denial” With Energy Crisis, Tom Pyle on Varney & Co.

June 27, 2022 by Leave a Comment

Monday, June 27, AEA president Tom Pyle joined Stuart Varney on Fox Business to discuss the Biden administration’s refusal to embrace energy realism. Watch the video below to see Tom call out Biden for chasing the “green dream” even while scaring away investments in reliable, affordable sources of energy.

Follow Tom on Twitter for his latest on America’s energy policy.

Tom on Twitter
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Biden’s Holiday From Reality

June 23, 2022 by Leave a Comment

President Biden is grasping at straws to reduce gasoline prices because he refuses to let the American people have access to oil and gas on their lands or modify regulations to encourage new refineries to be built. Instead, he has asked Congress to pass a gasoline tax holiday lifting the 18.4 cent federal tax on a gallon of gasoline and the 24.4 cent tax on a gallon of diesel through the end of September, which he hopes will make Americans vote for his favored people this November. Biden also demanded that companies pass on the benefits of the tax holiday to consumers, and asked states to suspend their gasoline taxes. The administration estimates that if states also suspend their gasoline taxes and oil companies step up refining, gasoline prices could fall by at least $1 a gallon. But because the federal gasoline tax makes up less than 4 percent of the total cost of gasoline per gallon, consumers probably will not see the federal tax change as significant, which is why he needs states to join in and is demanding refineries produce more.

It is unclear what refineries can do to help out President Biden. Because of Biden’s policies, onerous regulation and the realities of investment decisions when the government is saying they will end your business, the United States lost about 1 million barrels per day of refining capacity since the COVID pandemic began. Refineries are also converting to biofuel facilities where government policies and regulation encourage the improvement of their revenues through subsidies and mandates. The remaining operating petroleum refineries, which the Energy Information Administration indicates have a capacity of 17.94 million barrels per day, are producing at record rates of over 90 percent, supplying Americans with gasoline, diesel and jet fuel, among other petroleum products.

There is a small amount of idled refinery capacity, 0.4 million barrels per day, that Biden wants to have operable, but he has not provided any reason for the industry to bring those facilities back online. Rather, he has indicated that he wants to do away with fossil fuels, which makes companies reluctant to invest. The supply situation is so dire, refineries in India are raking in profits by buying oil at a discount from Russia and selling finished petroleum products to Western countries, including the United States. India and China have both added refineries in recent years to meet growing demand, while the United States was shuttering capacity.

Source: S&P Global

Congress has never lifted the gasoline or diesel tax, which supply the majority of the Highway Trust Fund—federal funding used to build and maintain highways—which in 2019 totaled $36.5 billion. For more than a decade, those revenues have fallen short of federal spending on highways and other public works, prompting transfers from the Treasury’s general fund to the trust fund to make up the difference. Despite the fact that outlays of the fund have exceeded dedicated revenues in recent years, Congress has not increased the federal gasoline tax since 1993. Biden’s request to suspend the fuel tax for three months will cost the Highway Trust Fund roughly $10 billion in forgone revenue that must come from someplace else.

State Experience

Some states, such as New York, Connecticut, and Georgia have already suspended state fuel taxes, and other states are also considering consumer rebates and direct relief. Maryland suspended its state tax of 36.1 cents per gallon on gasoline and 36.85 cents per gallon on diesel from March 18 to April 16, 2022. Georgia lifted its state fuel taxes for 10 weeks from March 18 until May 31, consisting of a tax of 29.1 cents per gallon on gasoline and a tax of 32.6 cents per gallon on diesel. Connecticut suspended its state tax on gasoline of 25 cents per gallon from April 1 to June 30. In each case, the tax holidays were relatively short, and the state taxes were higher than the federal gas tax of 18.4 percent.

Recent research at the University of Pennsylvania looked at the experience of the three states. The researchers found that the suspensions of state gasoline taxes in the three states were mostly passed onto consumers in the form of lower gasoline prices, but that the reduced-price levels were not sustained during the entire tax holiday. In Maryland, 72 percent of tax savings were passed onto consumers, in Georgia, 58 percent to 65 percent of the tax savings were passed onto consumers, and in Connecticut, 71 percent to 87 percent of the tax savings were passed onto consumers. However, as the market adjusted over time, the consumer benefit faded as can be seen in the graph below.

Gasoline Prices In Maryland, Georgia, Connecticut And The Rest Of The Country

Conclusion

Gasoline prices will decline if the demand falls, as it did during the COVID pandemic or if supply increases as it did when U.S. oil companies used hydraulic fracturing to produce oil from shale deposits. A gas tax holiday does not decrease demand nor raise supply because it is designed to be temporary. Further, not all the tax decrease ends up in the pockets of the consumer. And, as one can see from the above graph the prices in Maryland and Connecticut ended up slightly higher than the average of the other states after the tax holiday ended. (Georgia’s tax holiday did not end until the end of May.)

President Biden refuses to do what is necessary to truly lower gasoline and diesel prices because he has stated repeatedly he wants to put an end to fossil fuels. Companies will not invest under that environment because it makes no economic sense. Americans need and want fossil fuels to live a comfortable life. Biden’s policies will only result in economic damage and a lower living standard for Americans. The country does not need band-aids; it needs policies and regulations that encourage companies to make investments that benefit Americans. So far, President Biden has been taking actions to drive up the price of gasoline while talking about reducing them, as in the case of the suspension of the gas tax.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #89: Tough Stuff

June 23, 2022 by Leave a Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss the prospects of Congress passing a reconciliation bill, Biden getting his “gas tax holiday,” SCOTUS rulings, and an update on the Ukrainian conflict.

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President Biden’s Gas Tax Holiday: Another Empty Gesture

June 22, 2022 by Leave a Comment

Americans need real regulatory reform, not empty gestures.

WASHINGTON DC (06/22/2022) – Earlier today, President Joe Biden called for temporarily suspending the federal gasoline tax, asking lawmakers to pass a three-month pause on the federal 18-percent-per-gallon tax.

This continues his administration’s routine of offering empty gestures to Americans who are struggling with record-high energy prices. Since President Biden took office, his administration and Congressional Democrats have taken over 100 actions deliberately designed to make it harder to produce energy here at home. Thirty-two of these anti-energy proclamations were enacted after the Russian invasion of Ukraine, which Biden regularly touts as the reason for rising gas prices.

AEA President Thomas Pyle issued the following statement:

“President Biden is once again grasping at straws to make Americans believe that he is doing all he can to lower gasoline prices. The reality is the Biden climate agenda calls for higher energy prices and this Administration has done everything in its power to make energy more expensive for American families.

Instead of proposing what even President Obama called a gimmick, Congress should take substantive steps to reverse Biden’s assault on affordable and reliable energy from oil and natural gas. Clearly, the President doesn’t care about the struggles of American families. If the Democrats on the Hill still do, as they claim, they can do something that’s actually meaningful instead of playing along with Biden’s charade.”

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