Three Trump Policies Are Contributing to Gas Prices Hitting Four-Year Highs
This Memorial Day weekend, 36.6 million Americans are expected to take to the road. When they stop to gas up, they will see the highest Memorial Day gas prices since 2014, according to AAA. President Donald Trump is partly to blame for the bigger bite taken out of consumers’ wallets at the gas pump.
Since Trump’s inauguration, U.S. gasoline prices have jumped 60 cents per gallon, meaning the average American household is paying nearly $300 more a year for gas. In that time, gas prices have risen from $2.33 to $2.92 per gallon as of the week of May 21, 2018, a 25.7 percent increase.
“Americans can blame Trump when they get sticker shock at the pump this holiday weekend,” said Robert Weissman, president of Public Citizen. “President Trump’s policies are directly responsible for costing the very people he pledged to protect when he was campaigning as Candidate Trump.”
The spike can be attributed in part to three Trump policies:
1) Trump Is Rolling Back Clean Car Standards
The easiest and cheapest way to ease gasoline prices is to control demand. President Barack Obama did this when implementing fuel economy standards – known as clean car standards – that took effect in 2012, gradually increasing the required fuel economy of cars until 2025.
Greater fuel efficiency means fewer stops at the gas station. The standards already in place have saved consumers nearly $60 billion at the gas pump. If the standards continue unchanged through 2025, Americans would save $3,200 per car and $4,800 per truck over the lifetime of a new vehicle. Those figures only increase as the price of gas goes up.
But as soon as Trump was elected, automakers began urging the administration to roll back the standards. The U.S. Environmental Protection Agency (EPA) in April announced that the clean car standards are “not appropriate” and should be rolled back – even though automakers are meeting the standards faster and more affordably that originally predicted.
Strong fuel economy standards serve as the primary way to control a nation’s oil demand, and thereby keep prices low.
A leaked draft of the proposed rollback shows the administration’s preferred policy – freezing fuel economy targets at 2020 levels – could result in the U.S. using up to 283,000 barrels per day by 2025 and 881,000 barrels per day by 2035. This increase in oil demand could cost consumers as much as $236 billioncumulatively by 2035. Oil and gas markets already are building this future increased demand into today’s gas prices.
“Temperatures aren’t the only thing heating up this holiday weekend,” said Madeline Page clean cars coordinator for Public Citizen. “Thanks to President Trump’s policies, gas prices are on the rise, making Memorial Day weekend a scorcher for our wallets.”
2) U.S. Now Exports Oil
In 2016, Obama repealed (PDF) the 40-year limit on the ability to export U.S. produced oil. Just as Public Citizen warned (PDF), lifting the oil export ban encouraged companies to sell their U.S.-produced oil, thereby reducing domestic inventories and pushing gas prices higher.
The U.S. now exports 2.5 million barrels of oil every day and an additional 925,000 barrels of oil per day of finished motor gasoline. Never before in U.S. history have we exported so much oil. Meanwhile, drivers are demanding more gasoline – and will demand even more in the future if Trump rolls back clean car standards.
Trump can do something about this. Under the terms (PDF) of the repeal, “The President may impose export licensing requirements or other restrictions on the export of crude oil from the United States . . . if . . . the President declares a national emergency and formally notices the declaration of a national emergency in the Federal Register.”
But Trump has refused to consider declaring such an emergency to protect consumers – even though he is considering (PDF) using his power to declare a national emergency to force consumers to pay for a bailout of uneconomic nuclear and coal power plants.
And just this weekend, the Trump administration announced that increased energy exports to China would be the foundation of a deal to end the trade war with China.
“While Trump supports declaring a national emergency to bail out the coal industry, the president has been silent on using his power to do the same to stem the record oil exports that are contributing to higher gasoline prices for Americans,” said Tyson Slocum, director of Public Citizen’s Energy Program.
3) Trump Cancelled the Iran Nuclear Deal
On May 8, Trump announced plans to pull out of the Iran nuclear deal, which allowed Iran to export more oil. Immediately, gas prices began to climb in anticipation of disruptions in oil supply from Iran. Analysts agree that the withdrawal will put upward pressure on oil prices, perhaps amounting to 30 cents a gallon.
By the end of the day on May 8, crude oil prices had risen to more than $70 a barrel, the highest in four years.
Trump claims that unless France, Germany, and the UK help fix “terrible flaws” in the deal, he will exit the agreement and reinstate pre-2016 economic sanctions on Iran, the third-biggest oil producer in OPEC.