By JIM GERAGHTY
The U.S. is entering a severe energy crisis, and the Biden administration is whistling past the graveyard.
JPMorgan commodities analyst Natasha Kaneva predicts a “cruel summer” ahead.
“With expectations of strong driving demand — traditionally, the U.S. summer driving season starts on Memorial Day, which lands this year on May 30, and lasts until Labor Day in early September — U.S. retail price could surge another 37% by August to a $6.20/gallon national average,” she wrote in her May 17 research note.
This morning, the national average gas price is $4.59 per gallon — yet another all-time record. The average price in the state of California is $6.06 per gallon. Because prices in California are usually a dollar to $1.50 more than the national average, if Kaneva’s projection is accurate, Californians will be paying $7 to $7.50 per gallon by August.
If gas hits $6 per gallon, there are a lot of U.S. households who will struggle to afford the gas they need to commute to their jobs.
You can’t fix this by blaming “greedflation.” You can’t fix this by blaming Vladimir Putin. You can’t fix this by releasing oil from the Strategic Petroleum Reserve – which, by the way, is at its lowest level since 1987. (The U.S. also ended the winter with the least natural gas in storage in three years.)
No, the only way you can get prices to come down is to increase the supply of refined gasoline getting to the gas stations, and the only way to do that is to increase refinery capacity. Oil producers are starting to increase capital expenditures – a 60 percent increase from the third quarter of 2021 to the fourth quarter. After a steep drop in early 2020 because of the pandemic, U.S. domestic oil production is increasing; the U.S produced 11.3 million barrels per day in February – the most recent month that Energy Information Administration figures are available –which is around the production levels of the first few months of 2019.
But none of that bigger supply of crude oil does anyone any good unless it runs through a refinery to get turned into gasoline or diesel fuel. A wise administration would be doing everything possible to expand capacity at existing refineries and to clear red tape obstructing the construction of new ones.
Alas, we do not have a wise administration.