On the day of President Joe Biden’s inauguration, gas cost $2.39 per gallon. Earlier this week, that figure doubled to $4.82. And once again, gas prices reached a grim new milestone — hitting $5 per gallon on Thursday morning, per GasBuddy.
“It’s quite a big deal, because it’s not occurring in isolation,” American Enterprise Institute senior fellow Desmond Lachman told The Daily Wire. “People have been hit by high oil prices, but they’re also being hit by high food prices and the wages are not keeping up with inflation.”
According to AAA, the price at the pump is currently at a national average of $4.97 as of Thursday afternoon. In California, which has particularly harsh regulations on gas consumption, the cost per gallon reached $6.40.
The Biden Administration — which nixed expansions to the Keystone XL Pipeline last year and is dragging its feet on issuing oil and gas permits — claims that higher fuel costs may help the United States transition more quickly to renewable energy.
Nevertheless, a poll from Yahoo released last month showed that 66% of American drivers would make “significant changes to their driving patterns” if the national average cost of gasoline lies between $4.12 and $4.35 per gallon — a price that has since been exceeded. While 41% of respondents planned to only fill their gas tanks with what is affordable, 35% increased their usage of public transportation, and 29% canceled summer road trips.
“It’s a very visible product — it’s something that psychologically is quite a big deal, because you fill up your car every week or so,” Lachman, a former International Monetary Fund official, explained, affirming that the high prices are causing Americans to “pull back” on spending.
Despite rising from recession-era lows, consumer confidence — as measured by the University of Michigan’s benchmark Survey of Consumers — has been falling since the summer of 2021 and is presently near its lowest level in a decade. “These confidence numbers seem to keep coming down and plumbing new lows,” Lachman remarked.
The Federal Reserve, however, must weigh consumer spending habits in its tapering of aggressive monetary policy. Last month, the central bank hiked interest rates by 0.5% — the largest rate increase since May 2000 — in an attempt to tame inflation. The move followed a 0.25% rate hike from near-zero levels three months ago.
The high cost of fuel will diffuse throughout the economy as businesses face higher operating expenses.
“It raises their costs, it reduces their profitability — that’s not good coming at a time when the stock market is already on the back foot,” Lachman said. “When you add this all up, this is one of those forces that is adding to inflation and adding to inflationary psychology … you get this really unfortunate combination of inflation staying high and the economy beginning to sputter.”
President Biden has noted his decision to release millions of barrels from the Strategic Petroleum Reserve. Meanwhile, Biden has tried to make overtures to leaders of top oil producer Saudi Arabia — a nation with which the United States’ relationship is currently tense.
“So far, they haven’t been successful,” Lachman said of Biden’s attempts to lower gas prices, adding that perhaps “they might have moderated what might have otherwise occurred.”