Gas Prices Too High?

Heritage Explains

Gas Prices Too High?

The Left Says “Let Them Eat Cake!”

Everyone is talking about sky-high gas prices. $5/gallon is hitting all of us where it hurts. On this episode, Heritage Foundation Executive Vice President Derrick Morgan helps us understand why the left's proposed solutions to lowering sky-high gas prices are just gimmicks and do nothing to fix the actual problem. Instead, the Biden Administration should pursue and developing the abundant natural resources this great nation has.  

Tim Doescher: From The Heritage Foundation, I'm Tim Doescher and this is Heritage Explains. We've talked about it many times on this podcast, gas prices and other energy prices sky high. Now, the liberals here in Washington are acknowledging the incredible pain to our budgets that this is having. Let's listen in to their talking points on how they're going to fix the problem. Here's Senator Debbie Stabenow, U.S. Energy Secretary Jennifer Granholm, Senator Chuck Schumer, Vice President Kamala Harris, and of course President Biden in just a little montage John Popp and I put together.

Debbie Stabenow: I'd say just on the issue of gas prices after waiting for a long time to have enough chips in this country to finally get my electric vehicle, I got it and drove it from Michigan to here this last weekend and went by every single gas station. It didn't matter how high it was.

Jennifer Granholm: You filled up your EV by charging and you filled up your gas tank with gasoline and you have the same size tank, you would save $60 per fill-up by going electric rather than using gasoline. So it's very compelling case, but again to your point, we want to bring down the price at the point of purchase.

Chuck Schumer: We're here today because we need immediate relief at the gas point and the place to look is the strategic petroleum reserve.

President Biden: Exxon made more money than God this year and by the way, nothing's changed. By the way, one thing I want to say about the oil companies, they talk about how they have 9000 permits to drill. They're not drilling.

>>> We Don’t Need a Costly, Mandated Detour to Electric Cars

Kamala Harris: Prices have gone up and families and individuals are dealing with the realities that bread costs more, that gas costs more. We have to understand what that means. That's about the coast of living going up. That's about having to stress and stretch limited resources. That's about a source of stress for families that is not only economic, but is on a daily level, something that is a heavy weight to carry. So it is something that we take very seriously.

President Biden: By suspending the 18 cent gas tax, federal gas tax for the next 90 days, we can bring down the price of gas and give families just little bit of relief.

Doescher: So let's recap. The Democrats and liberals in Washington's solution to high gas prices: everyone buy electric vehicles to cruise on by the high gas prices, release oil from the strategic oil reserve, criticize and blame oil companies for everything, temporarily suspend the gas tax, and feel bad for struggling people. Is it working? With the national average for gas soaring over $5 a gallon and no sign of changing, here's the truth. The White House isn't offering real solutions, only gimmicks and attacks on the American energy industry. In fact, they consistently pursue anti-oil regulatory agendas designed to end America's use of conventional fuels like oil and natural gas. This has caused prices at the pump to skyrocket since Biden took office. In addition, is it even feasible to suggest that we can all afford a $56,000 electric vehicle? I can't.

Doescher: On this episode of Explains, we sit down with Heritage Executive Vice President Derrick Morgan. Before Heritage, he worked at the American Fuel and Petrochemical Association. So he's perfectly poised to discuss how the solution to sky high gas prices is obvious. We must unleash domestic energy production and take advantage of America's abundant energy resources. He's up, I'm up, you're up. We're going to get into it after this.

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Doescher: Derrick Morgan, the national average for a gallon of gasoline is close to $5 a gallon. That's compared to around $2.40 a gallon when President Trump left office. Now, the Biden administration is talking about a gas tax holiday. There's all sorts of voices in D.C. talking about this, and you just wrote a piece. It's called We Don't Need a Costly Mandated Detour to Electric Cars and it was posted in the Washington Times. It caught my eye because these are the avenues that they take us down. Instead of focusing on the real solution to problems, they start talking about, "Well gas is too high. Well drive an electric vehicle." So I just wanted to get you in here to kind of set the stage as to what we're seeing happen in D.C. because these are all just games in D.C. anyway. So just set the stage here. First off, why has there been such a huge increase in the price of gasoline?

Derrick Morgan: Yeah, that's a great place to start and that's where most people are feeling the pain right now. The fact is that the president's not helping himself and you hear his comments and the Secretary of Transportation who basically says you need to go and buy an electric vehicle. It's the transportation equivalent of saying, "Let them eat cake." It doesn't work. It's not going to work for most people. Electric vehicles are fine for people it works for, but it's not going to work for everybody. Instead of focusing on increasing American oil production, instead of looking at the refining industry which takes crude oil from around the world and turns it into gasoline and diesel and the products that we use everyday, they've been beating up the oil industry. He's been talking it down. He's been talking about trying to run them out of business. He said, "Look in my eyes. I'm going to end the fossil fuel industry," and then he wonders why supply is down. It's really astonishing.

Doescher: We played those clips at the top of episode of all these D.C. smarties and people in the administration. I say D.C. smarties because that's what they think they are and they think that they're fixing things, but the word ... You said, "Let them eat cake." The word that came to my mind was sadistic. It was like, "We're going to put this ... We're going to make them feel this so that will manipulate them to buy an electric vehicle."

>>> The Real Culprit Behind the Gasoline Supply Crunch

Morgan: That's right.

Doescher: But you have to pay for an electric vehicle.

Morgan: That's right.

Doescher: Those things are really expensive.

Morgan: They are. They are. That's right. So the way that they do this is they used to be a little more out in the open about this. So you look about a decade ago when they were first trying to push for cap in trade in President Obama's administration, they would testify in Congress, they would admit, "We need to make traditional fuels cost more so that renewables are more competitive." This is their whole plan. President Obama said prices would necessarily skyrocket. His budget director said we need to have increased prices so that people change behavior. So I think there's probably a conversation inside the administration. I served for a president. I'm sure there's people in there saying, "Mr. President, these high gas prices are killing you. You've got to do something about it," and then you've got the more environmental zealots that are saying, "This actually is according to plan. This is what we need. We need gasoline to be more expensive so that people will look at the alternatives." But the problem is people can't afford it. An average EV is about $60,000.

Doescher: Yeah, that's what I was going to say. $60,000 average.

Morgan: I mean even just buying a regular car right now is really difficult because of all the supply chain issues and the general inflation that the president himself is contributing to. So that's why I say it's like, "Let them eat cake." These people are completely disconnected from reality and by the way, those cars aren't great for every use. If you travel more than a 30-mile trip, you're not going to want to sit around at the gas station and walk up and down the snack aisle for 45 minutes while your car refuels. It's just not appealing.

Doescher: It's funny you should go there because that was the next thing I want to cover. What would an all-electric car world look like if the current fleet of cars that we have on the road were largely replaced by electric vehicles? Again, like you said, if I'm on a road trip going 600 miles, you have to stop at a rest area and just wait?

Morgan: You do and the manufacturers will tell you you shouldn't use supercharging too much because it wears down the battery life.

Doescher: So there's normal charging and then there's supercharging, you're saying?

Morgan: That's right.

Doescher: Okay.

Morgan: So if you charged your car overnight, you could maybe charge on what's called level one charging. You could charge all night and you wouldn't even get a quarter of the battery in some of these new models.

Doescher: Wow.

Morgan: But on supercharging, they say you can get 300 miles in roughly 30 minutes or something like that. Again, that's a lot longer than two minutes to fill up. I can go almost 700 miles on the tank that I've got in my car in the span of two minutes, right? So it's just convenient. Even worse than that, Tim, out in California, they've gone so far and we know California is the harbinger of things to come-

Doescher: It is.

Morgan: They've gone so far that not only are they going to say that every car has to be electric, there's no more gasoline lawnmowers to be sold. There's no more leaf blowers. Can you imagine trying to work out there in California sunshine? You've got a lawn crew that you're working and you got to have 14 electric lawnmowers. So you can use one and then go charge one while you use the second one. I mean just totally it just doesn't work. When you're out there working, you need a machine that'll work.

Doescher: Yeah. Let me ask you this. How are we currently getting our energy when we plug in our cars to charge them? Where's that coming from?

Morgan: The electric grid is still about 80% fossil fuels.

Doescher: 80% fossil fuels. Okay. All right.

Morgan: That's a little different in some states. If you've got the Niagara Falls or you've got really great wind or you've got really great solar, you might be a little higher than that or if you've got nuclear for that matter-

Doescher: Right.

Morgan: ... that could be emissions-free, but for the most part, you're looking at coal and natural gas.

Doescher: Okay. So I'm going to stop you there. So the left doesn't like that. They don't like fossil fuels. 80% of our energy comes from fossil fuels basically. Really they don't really like nuclear either.

Morgan: Right.

Doescher: So I guess my question is if all the cars on the road somehow became electric vehicles, could we power them and the rest of our economy with renewable sources of energy?

Morgan: Well we've kind of got a little bit of a sneak peek in California.

Doescher: Okay.

Morgan: You may recall that they've had some problems out there with their power grid.

Doescher: Just a few.

Morgan: So what are you going to do when there's a blackout and you can't fuel up your car? The gasoline and diesel supply is a robust supply of energy. You can fuel up the tanks higher before a hurricane comes in in Florida for example. You can try to get back in really quickly right after that. It's a different energy source and we know with energy, being diversified is good. Putting all of your eggs into one basket into EVs is a horrible idea for a lot of reasons.

>>> High Gas Prices: The Pain Is the Point 

Doescher: Let's just continue on this EV or this electrical vehicle track that we're on here, Derrick. I want to know what the mechanics of this would look like. Would we be subsidizing? Would we be ... How would we get electric vehicles more abundant on the road as they're proposing?

Morgan: There's a couple different ways. One way is they just hand out money through tax credits, a $7500 tax credit. The average income of that is well over $100,000 of people taking advantage of that. So it's not going to be the people that are most hurting with gas prices.

Doescher: Wait. $100,000?

Morgan: $100,000 household income is over 80% of the people that get these $7500 credits.

Doescher: Wow. Okay.

Morgan: So you can hand out money to people and encourage them to buy it. The other way they do it is so much more pernicious and so much more harmful because what they do is they have a mandate on the car companies that they have to sell a certain percentage of electric vehicles. They do this in California and they do it through the fuel economy rules in D.C. The effect of that is that your Dodge 1500, your Dodge Ram is going to cost thousands of dollars more because Dodge has got to turn around and buy credits, regulatory credits from an EV maker. So that increases the cost of some vehicles, internal combustion engine cars, so that people are "encouraged" to buy EVs. That just ramps up over time. Right now, we're feeling it. We're going to feel it a lot more. Right now, it's only 2%, 3% are EVS, maybe 4%. So you've got 25 internal combustion engine vehicle cars that are costing more to pay for that one EV.

Doescher: Wow.

Morgan: But they're talking about 50% EVS. Then you're just going to be jacking up the price of the internal combustion engine cars that much more so that people are forced in EVs.

Doescher: I mean really what that is is it takes the states that have an easier time putting in charging stations ... California, they've been on this track forever. They've got charging stations all over the place and everything's relatively close. In New York City, Washington, D.C., it's all close, but what about somebody in Idaho who's traveling 50 miles one way to work everyday?

Morgan: Exactly right.

Doescher: That's screwing them.

Morgan: That's right. Or I imagine a lot of your listeners are probably in real estate or some other business, sales, where they're in their car all day long. You're going to want to take 30, 45 minutes out of your day to sit around while your car is charging? No, you want to be out on the road doing your job.

Doescher: If you can find a charging station even.

Morgan: That's right. Or delivery driver, all kinds of folks, you're in the lawn business like we were talking about earlier. It's really out of touch, out of step, doesn't work for rural populations, doesn't work for everybody, and that's why government mandates never work well.

Doescher: Well as we said at the top of the interview here, President Biden wants to implement a gas tax holiday. Federal gas tax is about 18 cents a gallon. Again, average gallon of gas right now is $5 a gallon. What impact would this have?

Morgan: It'd have very little impact. Far be it for me to argue against a holiday. I love holidays.

Doescher: Sure.

Morgan: And I love lower taxes so that's all fine and good, but it's about 4% of the price. There's different research that shows that more or less of it would go onto the consumer. We had some experiments with that at the state level. I know Maryland had a holiday for a little while. I'd be interesting to see the data and all that, but the fact is it's like putting a bandaid on a cancer patient, someone said to me earlier today. We have got a huge problem here with the administration talking down the oil industry. You got to remember it's not only the upstream industry that has to go find the crude oil, pump it out of the ground, and get it to a refinery. You also need these massive capital-intensive industrial plants called refineries to take that crude oil and turn it into products. Those plants are a really long timetable. There's one in Houston that's about to go out of business in part because of bad policy. It's 104 years old.

Doescher: Oh, my gosh.

Morgan: So if you're looking at spending multiple billions of dollars to build this plant and equipment, why would you do that when President Biden has said he wants to lower greenhouse gas emissions which is basically he wants to reduce oil demand by 50% in just about a decade and he wants 100% net zero by 2050? So if you're a businessman, you're looking at yourself like, "Why would I make a multi-billion dollar investment that I want to recoup over 80 years when the president is saying he wants to put you out of business?" That's where the mismatch is.

Doescher: Yeah, it seems to me also that if you have a temporary lowering of the gas price, people are going to go fill up their tanks, they're going to go fill up their extra tanks and their extra cans and things like that which is then going to increase the amount of use that we have. We're not renewing leases. We're not drilling more. We're not producing more. So that's going to actually potentially increase the price after the gas tax holiday is over.

Morgan: That's right. If you don't hear anything else out of this podcast-

Doescher: It's a reverse outcome.

Morgan: ... please don't fill up trashcans with gasoline. We saw this last year. It's not good for anybody. Only approved containers. But you're exactly right. You'll increase demand in the short-term and that will exacerbate the problems with it. Like I said, it's mostly a gimmick. I hate to agree with President Obama who called it a gimmick when Biden was his vice president, but I think that's probably right. Let's look at the real problems and again, that's more upstream production. Let's open up leases. Let's open up American supply and let's look at the refining industry. It's been hammered over the last two or three years. Some people like to talk about greedy companies and this and that, but the fact is that companies are always looking to make profits. I don't understand why they wouldn't have been last year and they are this year, but setting all of that aside, the point is a million barrels a day of refining production has gone offline because of bad public policy. I would point you to those carbon reductions we already talked about. I'd point you to the renewable fuel standard that President Biden just put out, the highest ever requirements for renewable fuel.

Doescher: Yeah, right.

Morgan: That's pushing refineries out of business. Then you've got bad policy like low carbon fuel standard, biodiesel tax credits. There's nothing wrong with biodiesel or renewable diesel. Renewable diesel in particular is a pretty good product. It's basically the same as diesel, but you have companies that are taking refineries that would put out 160,000 barrels a day and when they change it over to a renewable diesel plant, it's about a quarter of that. All of that capacity has gone out of the market thanks in a large measure to bad public policy.

Doescher: When I go travel around the country which I do a lot, talking about the weather with people is something commonly when you meet somebody, "Hey, nice day we're having here. Hey, cloudy day we're having here." Right now, it's gas prices, Derrick. They talk about how high gas is and my question then is if I'm talking about that with people, they're talking about it with other people, how should our listeners, how should we explain the reasoning, how should we explain the sensible outcome and the sensible policy solutions that should be pursued in order to fix that gas price, in order to put that on? We can talk, again, in Wonkville all day here.

Morgan: Right.

Doescher: But when it comes down to it, I want to educate the people who are listening right now as to how to talk about this with their friends and their family.

Morgan: Yeah, I would put it very simply as supply-side economics. Tim, you worked for Steve Moore.

Doescher: Yeah.

Morgan: We saw what happened when Jimmy Carter had this country in a ditch on a side of the road. President Reagan and a lot of smart economists like Art Laffer and Steve Moore and his predecessors who all said, "We need to focus on the supply side of the economy." Right now, they're not doing that. We see shortages. We see shortages in chips. We see shortages in baby formula, shortages in toilet paper early on.

Doescher: Yeah.

Morgan: Now, we're dealing with a shortage in crude oil supply and in refined product supply. We need to focus on the supply side and what President Reagan taught us is with the right government policies, you can turn it around. With higher supply, you get lower prices. That's what we need to focus on, more supply of crude oil, more supply of refining. That would be the ticket.

Doescher: Well Derrick, you are nailing this right now and I'm going to make sure I link to your piece and all the other work that you've done on this. You have a very, very long history and career dealing with this. Just as a personal note here, the very first interview I ever had at The Heritage Foundation was with you and I didn't end up getting the job. So all I can say is that I'm glad to be here with you now. It may have taken seven years, but we are here.

Morgan: Nobody is perfect and everybody makes mistakes and clearly I made a mistake.

Doescher: Oh, right. Yeah. Right. Oh, my gosh. Well again, just thank you so much for being with us on Explains this episode.

Morgan: My pleasure. Thank you, Tim.

Doescher: Now, Derrick has been working overtime on this issue. So thanks so much once again to Derrick for being on this episode. Go over to the show notes and read the work that he's done over the last couple weeks on this. It really is compelling and it's going to give you a good base point to jump from as you go to explain this to your friends and family which is of course why we do this podcast. We hope that you get information from this and you are evangelists for freedom and liberty. If you haven't already, please subscribe to this podcast, rate us five stars, share it with your friends and family. That's how we grow. That's how we get the word out. Michelle's up next episode and we'll see you then.

Heritage Explains is brought to you by more than half a million members of The Heritage Foundation. It is produced by Michelle Cordero and Tim Doescher with editing by John Popp.