How U.S. Can Ease Gas Prices, According to Banking Analysts

Instead of suspending federal taxes on gas, President Joe Biden should use his powers to increase refining capacity to ease prices at the pump, analysts from JP Morgan have said.

Biden has called for Congress to back suspending for three months the 18 cents that drivers pay in federal tax per gallon of gas which as of Friday cost an average of $4.92.

His $10 billion proposal has received push back from some fellow Democrats, as well as transportation and infrastructure sectors, which have warned it would cause a temporary cut in revenue for the Highway Trust Fund and impact road upgrades and jobs.

But in a note to clients, JP Morgan commodities experts said on Wednesday that a long-term plan to curb prices should involve Biden making good on his announcement earlier in June that he would use "all reasonable and appropriate federal government tools" to tackle gas prices.

The financial services company said that gas prices would not drop until the Biden administration tackled supply-side issues, which include a shortage of refining capacity.

As such, the Biden team should look at using the Defense Production Act "to order refiners to bring some of their shuttered plants back online."

The analysts also said that, given it takes an average of six to 12 months for shuttered refineries to restart, Biden "could also consider ways to keep refineries that plan on closing in the near future to remain open." This would help stave off "an even more severe shortage of capacity in 2023."

The analysts also said that instead of sanctions-hit Russia, the U.S. could source from Venezuela the vacuum gas oil, which is used in gasoline production, according to Market Watch. Persuading China to increase its quotas of transportation fuels exports could increase supply by about 500,000 barrels per day, they added.

Biden has repeatedly blamed his Russian counterpart Vladimir Putin's invasion of Ukraine for the rising gas prices, although experts have said it is only one of several reasons why Americans are paying so much to fill up.

Biden has criticized the oil industry for its higher profits and called on it to increase production. The industry has hit back, saying that high prices are a result of his mixed messaging over what they perceive to be limits on domestic oil and gas production. Also, it questions Biden's assertion that production can be increased easily.

The American Petroleum Institute said this month that U.S. refineries are operating "at or near maximum utilization," or around 94 percent of capacity, which is "among the highest in the world."

Frank Maisano from Bracewell PRG, which represents the fossil fuel and renewable energy industries, said that refining capacity is already "maxed out." He told Newsweek that workforce shortages, supply chain issues and the pent up demand following the end of COVID restrictions "are limiting our ability to expand production faster."

Newsweek has contacted the White House for comment.