White House economic advisor discusses fuel prices in Q&A
Inflation has hit paychecks pretty hard this year as it is at a 40-year high . Decision makers in Washington, D.C. are hoping to see inflation go down. In fact, the Federal Reserve hiked interest rates by another three-quarters of a percentage point in October, putting the rate at 3.75 percentage points, up from zero in March.
Jared Bernstein is a member of the Council of Economic Advisers for the White House, and tackling inflation is part of his job. Wyoming Public Radio's Caitlin Tan asked him how the White House is thinking about tackling inflation and increased fuel prices in rural areas.
Jared Bernstein: Very much like you're thinking about them and like your listeners are thinking about them. In fact, and this comes directly from President Biden, I mean, from the very beginning, he stressed that he's not the president - we're not the administration - of big cities, full stop. We have to be mindful of people in areas where the kind of vulnerabilities, particularly around energy prices are most pronounced. And so when we talk about trying to give people breathing room at the pump, it's rural folks with, you know, 50 to 100 mile drives, it's just a normal part of the day, who are foremost in our minds.
So the President, I think it was back in March, oversaw the largest release of oil from the strategic reserves. And by the way, the strategic reserves is this large collection of crude oil that the government oversees. And there were those at the time, who were saying, 'Well, why the big release from this reserve?' And the President was very clear, because people are going to start feeling real pressure at the pump due to the war in Ukraine and the fact that that's occurring in an area where commodity prices, energy and food are so important, they're going to need some relief. And so that's helped a great deal. We've seen in Wyoming, we've seen the price of gas fall from $4.90 a gallon to $3.70 a gallon. So that's some breathing room, but we've got to do more.
Caitlin Tan: Yeah, and I think around here also, we really rely on diesel and that has been something that hasn't necessarily come down in price yet.
Wyoming's Governor Mark Gordon actually created a working group this summer to address gas and diesel prices and to try to find some relief. So some of their recommendations were partially refunding people for fuel over $4 a gallon, or funding a fuel tax credit for the disabled or elderly, and even possibly reimbursing oil producers for federal royalties paid on production. I'm wondering, just off the top of your head, do any of these ideas seem viable to you?
JB: I think the most important thing when it comes to energy in general, retail gas and diesel also, is refinery capacity. That's where we have a real logjam. And so we need companies to invest in more refining. We also need to make sure that we are working with our global partners to ensure that the flow of refined product, including diesel, is occurring.
It takes about two years to set up a refinery. So this can't necessarily be from scratch if we're talking about helping people in the near term. And that means making sure that the refineries that are currently producing are doing all they can to continue that production, maybe adding a line or two. And that's one reason why the President came out, I think it was last week, and said, 'Look, you've got companies, Exxon is one example, but just one among many, that are sitting on the largest profitability that they've ever seen. Some of these companies have never been more profitable. So instead of share buybacks and dividends, what we need to see them doing is investing in more production and particularly more refining.' Refining of the distillates that we've discussed, with diesel at the top of the list. And so any policy that's going to help get us there is worth pursuing.
What I'd be cautious about are policies that increase the demand side without the supply side, because if we don't intervene more on the supply side, and we just have more demand, that's just going to lead to longer lines. And we don't want to see that.
CT: What do you see then in the short term going forward? What could people in Wyoming kind of expect, kind of a roadmap with inflation here?
JB: Well, I think there are two things to keep in mind. One is that there are aspects of inflation that have been improving if you get under the hood. And some of them are kind of important in rural communities and in Wyoming. So for example, our supply chains are much less snarled and that's helping to put some downward pressure on the goods inflation - things you buy at Walmart or Target and Amazon, but also for farmers getting your goods to market and out into the global economy, getting things on trucks, into ports and out there into the world. That's happening a lot more smoothly now than it did a year ago. And we're seeing some positive impact on that in terms of lower goods inflation.
We talked about the energy story. I think there's more work to do there. The President does have the capacity to go back to the strategic reserves. As we've mentioned, it's still more than half full. But as you mentioned, especially with diesel, there's a key model back there with refineries. And so that's another area we have to pay attention to. I think finally, the point that we shouldn't overlook is that the job market, and this is the case in Wyoming as well as the rest of the nation, is very strong - unemployment is quite low. And that means a really important tailwind for families that are dealing with some of these price pressures.
CT: Anything else you would like to add that we haven't discussed today?
JB: Well, I think there are three policies that President Biden has presided over in terms of getting legislated - the Infrastructure Act which was bipartisan, the CHIPS Act was also bipartisan and the Inflation Reduction Act. Now each one of those is targeting this inflationary problem and in its own way. Of course, the Inflation Reduction Act lowers the price of health care, of insulin, of prescription drugs, lowers the cost of clean energy and invests deeply in this transition towards clean energy with standing up electric vehicle and battery production in this country. It's very important that we continue to pursue and implement that. Similarly with the CHIPS Act, standing up a domestic semiconductor industry, with the infrastructure law and making sure our water systems, our airports, our roads and bridges, get back to the kind of quality that we need them to to be globally competitive. So I think another part of the message, especially today, is to make sure that we have the capacity to continue to implement these policies, all of which are legislated. So that's a lot of our work in the coming months and years.