Why the Biden Administration’s Plan to Fix Gas Prices Isn’t Working

In other major oil-producing states, prices are kept low as a matter of politics, to meet domestic demand and seed goodwill about the exploitation of a nationally important resource. There’s a cynical element to that, of course: High fuel prices can (and do) bring down governments. But in many places, it also reflects a dramatically different relationship to natural resources. In some countries, natural resources are seen as something that populations should benefit from, meaning that demands are met domestically and revenues from exports are funneled toward economic development and more generous welfare states. 

Unlike most other major oil producers, the U.S. fossil fuel sector has been historically dominated by the private sector, which mostly siphons oil profits to the already rich. While the U.S. is the world’s largest oil producer, oil rents account for just 0.2 percent of GDP here—the same contributions they make in Romania and Barbados. “The U.S. is a net exporter. It can just set the price, but to do that you would need either nationalization or nationalization-like things” Russell says, to exercise control over production and exports.

Unable or unwilling to exercise a direct say over fossil fuel investment, production, and (certainly) the machinations of commodity traders, policymakers in the U.S. have resorted to nudging companies to boost domestic production in the hopes this will have some oblique effect on the index prices influencing the price per gallon at the pump. Policymakers could, in theory, also encourage more investments in refining capacity, Blas told me, which has declined in recent years. That’s all a lot easier said than done, though. Production now is the result of investment decisions made two, five and 10 years ago. It’s only really a few Gulf Oil producers—Saudi Arabia chief among them—that can turn the taps on virtually overnight. Bringing a new shale well online is a little quicker, and rig counts have been picking up in recent weeks, but bullish projections about supercharged production are still fairly modest.