Friday, March 25, 2022

Fact-checking Biden's claim that oil and gas companies are price gouging

Fact-checking Biden's claim that oil and gas companies are price gouging

As rising prices at the pump continue to squeeze wallets, President Joe Biden has stepped up attacks on oil corporations that he claims are charging motorists more just to pad their pockets.

It was the latest scapegoat for the high fuel costs that have put political pressure on Democrats. Biden and his aides had previously attempted to pin the blame on Russian President Vladimir Putin, whose invasion of Ukraine prompted Biden to ban imports of Russian oil and gas earlier this month.


That messaging had begun to fall flat under scrutiny.


The price of gasoline had indeed risen more dramatically in the weeks since Russia invaded Ukraine, but the cost of fuel had already been climbing for months before the oil embargo.

On Feb. 24, when the Russian invasion of Ukraine began, the average per-gallon cost of gasoline was $3.52. On Friday, the average was $4.27, according to AAA.

In November 2021, long before the violence began, gas prices were up nearly 60% over what they were in November 2020 — rising from $2.20 to $3.49 in that time.

Biden’s rhetorical pivot marked an effort to point the finger at a familiar foe for Democrats: Big Oil.

In a tweet Wednesday, Biden said that because oil prices are beginning to fall, so too should gas prices. He accused oil and gas companies of trying to “pad their pockets” by not dropping gas prices to reflect the drop in crude oil prices.

But experts have said they don’t see evidence of price gouging from oil and gas companies.

The price of oil did begin to fall starting last week and had dropped roughly 30% by this week.

That came after a massive spike in global oil prices following Russia’s invasion. Fearing widespread energy embargoes on Russian producers — which the United States did impose, although European countries did not — investors reacted to the uncertainty of the situation in late February, and oil prices jumped above $100 per barrel.

Reports have attributed the more recent drop in global oil prices over the past week to hope for peace talks between Russia and Ukraine as well as new COVID-19-related lockdowns in China, which investors believe could drop demand in one of the largest energy markets.

Industry experts have said the price of gasoline, which is made from crude oil, often responds slowly to both oil price hikes and drops.

That’s because gas companies can’t hike their prices high enough or fast enough to recoup losses from dramatic spikes in the global cost of oil — like the one that occurred when Russia invaded Ukraine.


While oil prices are set on the global market, prices at the pump are often set by conditions in local markets — such as whether the gas station down the road in any given town is raising prices and by how much.

Gas companies therefore lose money when the price per barrel of oil jumps significantly and gas prices climb incrementally.

When the price per barrel of oil falls dramatically, as it has in the past week, gas companies often lower their prices at the pump more slowly in order to make up for the revenue lost when the oil price spike outpaced the gas price increase.

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