Federal policymakers have few options to lower gas prices in the short-term, according to energy analysts.
The recent run-up is fueling election-year political battles and thrusting White House energy policy into the spotlight, with Republicans blaming President Obama and the White House working hard to deflect criticism. As of Friday, gasoline was averaging $3.75 per gallon nationally, according to AAA.
But because gas prices are tethered to oil prices, which are set by global markets based on a slew of complicated factors, energy experts say there’s not a lot U.S. lawmakers or the White House can do, at least in the short term.
The independent Energy Information Administration, the Energy Department’s statistical arm, has echoed Kaufmann’s sentiments.
Richard Newell, the former administrator of the EIA, said policymakers can influence gas prices in the short term “only under some very limited circumstances.”
One option, he said, is to tap the Strategic Petroleum Reserve, a 696-million barrel stockpile of oil stored in salt caverns along the Gulf Coast, in conjunction with other nations.
“When the SPR is used, it tends to have a short-term impact,” said Newell, who is currently a professor of energy and environmental economics at Duke University.
But Newell warned that oil should be released from the SPR only if there are major supply disruptions.
“I don’t think we’re currently in that situation,” Newell said, adding that policymakers are likely watching the increasingly tense situation in Iran, where officials have threatened to block a strategic oil route.
A handful of Democrats have been pressing Obama to release oil from the SPR for weeks, but Republicans dismiss the tactic as a ploy to score political points amid high gas prices.
Obama released 30 million barrels of oil from the SPR last summer in conjunction with International Energy Agency member nations to make up for supply losses from Libya that officials said were threatening the economic recovery.
The president is under heavy pressure from Republicans to greatly expand areas available for drilling.
Current plans include more onshore and offshore lease sales in the Gulf of Mexico and, in several years, off Alaska’s coast. Critics want to see areas off the Atlantic and Pacific coasts opened, as well as the eastern Gulf of Mexico and the Arctic National Wildlife Refuge (two areas that require congressional action).
But a 2009 report from the EIA predicted that a dramatic expansion of offshore oil and natural gas leasing on the Atlantic and Pacific coasts, as well as in areas of the Gulf of Mexico currently off limits to drilling, would only result in about a 3-cent-per-gallon decrease in the price of gasoline by 2030.
Opening new areas to drilling, especially offshore tracts, typically doesn’t bring on new supplies for years, given long lead times and approvals needed to go from exploration to producing oil.
But Republicans and industry advocates insist that expanded leasing could nonetheless affect prices relatively quickly by signaling that expanded supplies are planned.
It’s an implicit concession to the idea that speculative trading has an effect on prices.
“You begin to see the market take that into consideration,” Jack Gerard, CEO of the American Petroleum Institute, told CNBC recently.
Amy Myers Jaffe, a fellow at Rice University’s Baker Institute, said expanded development in the United States could potentially lower the price of gas by sending a signal to the market, even if it takes years for new supplies to come online.
“If I know that the supply is coming, the market psychology is different,” she said. “To say that drilling will not help, that is definitely not true.”
Many Democrats, while typically resisting calls for a major leasing expansion, say Wall Street traders are bidding up oil prices far above what supply and demand fundamentals dictate.
They want federal commodities regulators to implement new curbs on “excessive” speculation.
Newell, the former EIA administrator, notes that “speculation does and has always existed in oil markets. This is not always a bad thing.”
“It’s a good thing for market participants to take into account what the future might hold in terms of supply and demand,” he said.
But Newell cautions that commodities regulators are not going to don a Superman cape anytime soon.
“Even if one determines, there was some degree of speculation in oil markets that was somehow not related to these fundamentals of supply and demand, the ability of regulators to curb this in a way that would lead to better marketplace conditions, I think is fairly limited,” he said.
“I would not,” he added, “be looking to regulators to provide some near-term solution.”
Tom Kloza, chief oil analyst at the Oil Price Information Service, warns that, despite all of the politics surrounding gas prices, the 2012 spike is part of a “natural rhythm” that occurs annually.
“It’s an election year, so it’s getting a lot more attention,” Kloza noted.
He said gas prices usually increase and hit their peak in late April only to decrease and reach their lowest point in November, just in time for the election.
“It absolutely has nothing to do with politics, but the first week of November is election week,” Kloza said.
Ben Geman contributed to this story.