Members of Iowa’s Republican congressional delegation took to social media platform X, formerly Twitter, over the weekend to blame Democratic President Joe Biden’s energy policies for a sudden jump in prices at the pump.
Iowa was one of 26 markets — all of them in the Corn Belt — where the average price of gasoline rose by more than 30 cents per gallon from a week ago. As of Monday, the average price per gallon for gas was $4.047 in Iowa City and $3.995 in Cedar Rapids, according to the fuel price tracking website Ga
sBuddy — a roughly 40-cent increase from the week before.
While the hike was fairly sudden and unexpected, wholesale gasoline prices in the Midwest are starting to stabilize and relief at gas pumps in Iowa should soon follow, according to analysts.
As of Wednesday, the price of regular unleaded gasoline averaged $3.92 across Iowa
according to AAA. That’s up 34 cents from last week’s price and up 51 cents from a year ago. The national average on Wednesday was $3.85, up 5 cents from last week’s price.
Iowa Republican U.S. Sen. Chuck Grassley took to social media to blame Biden’s “boneheaded energy policies,” namely canceling oil and gas leases issued by Republican former President Donald Trump’s administration in Alaska's Arctic National Wildlife Refuge. Iowa GOP U.S. Sen. Joni Ernst and U.S. Rep. Ashley Hinson, a Republican from Marion, posted similar tweets.
Democrats, meanwhile, cited reports that gas prices could rise as
Russia and Saudi Arabia announced new production cuts.
Analysis
Patrick DeHaan, head of petroleum analysis at GasBuddy, said refinery issues have caused prices to spike in several Corn Belt states. It's not the first time such outages and maintenance have caused temporary spikes.
In 2015, a refinery outage in Whiting, Ind., caused prices in Chicago to skyrocket by 50 cents up to $1 a gallon overnight, while the national average rose only slightly.
DeHaan said the same has occurred in Iowa and surrounding states.
Over the last week, refineries in Minnesota, Oklahoma and Illinois have been struggling due to both scheduled and unexpected maintenance outages, DeHaan said.
A refinery that goes down has contractual obligations to supply certain volumes of gasoline to stations. If an unexpected outage happens, the refinery that goes down suddenly may not have enough supply to meet its obligations and has to find another refinery from which to buy. This can push prices up considerably, as a refinery could be a very large buyer.
Timing as well played an issue, being just a week away from a switch over to cheaper winter gasoline, causing a large, but temporary, squeeze in the market, DeHaan said.
As a result, the wholesale price got pulled higher by the fact one refinery was paying well above market rate to secure supply, which then pushes the retail price higher.
“How can you tell that the gas price spike in the Corn Belt has nothing to do with Biden or Arctic National Wildlife Refuge drilling? If it did, it would be hitting oil prices as well, to the same degree,” DeHaan said.
Crude prices rose slightly, but then
dipped Wednesday after earlier hitting a 10-month high, as a surprise build in U.S. crude inventories offset expectations of tight crude supply for the rest of the year.
Mike Terry, president of the Oklahoma Independent Petroleum Association,
told The Journal Record that due to limited number of U.S. refineries, “any little disruption can make a difference” in pricing.
“Crude oil has been above $70 (a barrel) for several weeks, but we didn’t see a (gasoline) price spike until we had these refinery problems,” Terry told the paper. “There is (plenty of) crude oil. We just don’t have enough availability to refine.”
U.S. oil refineries — which turn crude oil into usable products like gasoline, diesel and jet fuel — have lost capacity in recent years making it difficult to increase supply and stabilize gas prices at the pump, ac
cording to data from the U.S. Energy Information Administration.
Some refineries closed during the pandemic in 2020, when demand for gasoline took a nose dive with fewer people commuting, traveling and driving. Not all have come back online. The United States had six fewer refineries at the beginning of this year than at the beginning of 2020. Refining capacity in the United States was about a million barrels a day below what it was before the pandemic.
Biden has called on oil companies to boost production, and the country is
on track to pump more oil than ever, produce a record amount of natural gas and expand clean energy capacity. The
U.S. Energy Information Administration expects U.S. crude oil production to surpass an all-time high of 12.9 million barrels a day this year and keep growing to exceed 13 million in 2024.
Grassley’s office notes that in January 2021, the national average price of gas sat at $2.39, while Wednesday’s average was $3.85. And gas reached a record high in June 2022, ja year into Biden’s presidency, when the average price soared above $5 a gallon nationally. Within that same time frame, inflation leapt to a 40-year high.
Grassley’s office argues the Biden administration’s actions “project uncertainty on the oil market, which impacts consumer costs and provides producers little room for adaptability.” Continued moves to strip oil and gas leases — like those announced last week in Alaska — further diminish the domestic oil market, his office argued.
“President Biden shutting down access to oil and gas does not bring down the price of gas for Iowans at the pump,” Grassley’s office said.
However, the Trump administration
found few takers at its sale of drilling leases in the Arctic National Wildlife Refuge — largely because it’s not lucrative to drill in the area with lacking infrastructure, DeHaan said. Regardless, Biden canceling the leases is irrelevant to the argument as the price of oil never reflected oil flowing from the region, he said.
The same with the Keystone pipeline. There still needs to be interest from oil companies in producing oil to fill the pipeline before the loss of the pipeline becomes a reason prices are impacted, he said.
Conclusion
Ultimately, any White House has little control over a global commodity, like the price of crude oil. And because the recent surge in prices has been localized to the Midwest — and without a corresponding increase in crude oil prices — to suggest a White House policy impacted only eight states instead of all 50 comes off as hyperbole.
That seems especially the case when combined with signs that wholesale gasoline prices in the Midwest are starting to stabilize, inventory is up, Biden has
called on oil companies to boost production and the policy decisions cited did not impact existing supply that would affect current pricing.
For that, we give the Republican claims about this spike an F.
Prices spiked in Iowa last week. An analyst says refinery disruptions are the real cause, and prices should start dropping soon.
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