Everything You’re Hearing About Gas Prices Is Wrong

Who’s responsible for the high gas prices that have taken hold across the U.S.? If you listen to your average Republican, you’ll hear blame placed on the energy and climate policies of the Biden Administration—with some even suggesting that a nefarious “Green New Deal” has led to the price hike. Meanwhile, Democrats, including many in the Biden White House, will point to “price gouging” by greedy oil and gas executives who are manipulating consumers.

Depending on how generous you’re feeling, these explanations are half truths, at best, or bald-faced lies, at worst. High gas prices are the result of a complex set of circumstances—including the Russian invasion of Ukraine, supply chain challenges, and other market dynamics—and can’t be easily boiled down into a talking point.

Of course, it’s easy enough to understand why politicians, oil executives, and political commentators have relied on such rhetoric. Elected officials are jockeying for votes and political sway in the midst of a heated election year while fossil fuel companies are fighting to secure a profitable future amid the clean energy transition. With these stakes, it’s hard to imagine any player changing course and embracing nuanced, heady positions about the economic and political factors contributing to high gas prices.

But details matter as we consider the challenges of transitioning our economy away from fossil fuels and addressing the now-inevitable and already unfolding impacts of climate change. And the current debate around gas prices tells us a lot about how policymakers can miss the forest for the trees.

To understand the misrepresentations around gas prices, it’s helpful to look first to Republicans, who have been using climate as a political cudgel for decades. Republicans have repeatedly used the argument that climate policy will cost consumers to deflect any and every legislative attempt to reduce emissions. So it came as little surprise that they blamed Biden and his climate agenda when gas prices started to rise, in some cases asserting that his “Green New Deal” had driven up prices.

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“In some parts of the country, the price has crossed $6.90 a gallon. This was not an accident,” Sen. Ted Cruz (R., Texas) said during a meeting of the Senate Committee on Commerce, Science, and Transportation. “This was the result of the Green New Deal zealots in the Biden Administration.”

It almost goes without saying that this—especially in the most extreme version—is totally false. Biden has struggled to implement even basic climate policy, let alone anything close to a Green New Deal. Moreover, the Administration has been working furiously to find any policy lever to reduce gas prices, understanding that high gas prices portend poor political outcomes.

If there is a small kernel of truth amid the unfounded rhetoric, it is that the Administration has sought from the very first days in office to send a market signal that fossil fuels broadly are not the future. Indeed, Biden and others in the Administration have argued that such a signal is among their greatest contributions to the climate fight. This dynamic, which is loose to say the least, is hard to quantify and certainly not a primary factor in the high gas price environment we find ourselves in, but it is part of the broader global consensus that money should be shifted away from fossil fuel investment. This is an important point. As the energy transition advances, policymakers pushing climate policy will need to be able to make the case for a continued shift of investment away from fossil fuels and toward clean energy—even amid volatile fossil fuel prices.

The Democratic talking points take a bit more explanation. Activists who oppose the oil and gas industry have pointed to the fact that the industry is making record profits as evidence that executives are ripping off American consumers. Many Congressional Democrats have run with that line of reasoning, introducing anti-price gouging legislation. Meanwhile, President Biden called on the Federal Trade Commission to launch a consumer protection investigation last November as gas prices began to rise even before Russia’s invasion of Ukraine. “The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump,” Biden wrote in November. “I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct.”

It’s certainly true that energy companies are enjoying record profits this year as oil prices have soared. But generating a large profit doesn’t necessarily—or even usually—equal price gouging. Oil prices have risen because demand has risen (the economy continues to grow post-COVID) while supply has fallen (Russian oil is no longer welcome across much of the world). In this environment, U.S. producers are simply maintaining the course. This, some Democrats claim, is evidence of price gouging because, they say, companies should be responding to market pressures and produce more.

It’s true that U.S. oil companies could plan to ramp up their production, though it would take months to years before this affects the market. Oil companies don’t want to do that out of fear that more production could lead to too much production and drive down prices—and profits. Indeed, overproduction led to years of losses for the industry in the last decade. So while it’s obvious that oil executives are looking after their profit, it’s unclear how that adds up to price gouging. A recent report from the Congressional Research Service boils down its definition of price gouging to “unfair” inflation of prices by companies to take advantage of an emergency situation.

Why am I bothering to split hairs about this rhetoric? To my mind, not only do these talking points serve as a distraction, but they also misrepresent the nature of our energy and climate challenges. The Republican rhetoric is simply wrong, suggesting that Democrats have imposed draconian climate policies when in fact the world needs far more aggressive action. The higher-level problem with Democratic rhetoric is a little more subtle. The problem isn’t that companies are violating American laws and norms by engaging in practices like price gouging; the problem is that American laws and norms haven’t adjusted to the energy and climate challenges we face today. Not only is it perfectly legal to dump carbon pollution into the atmosphere while earning a massive profit, but the government supports and subsidizes the practice. The sooner we speak honestly about our challenges, the sooner we can solve them.