Debate Racing On Sources, Prices, Tax Relief Proposals
President Joe Biden banned the import of Russian oil, natural gas and coal Tuesday, an action that is likely to further raise the sky-high price of gasoline in the short-term but one that environment-minded advocates hope will lead to a long-term separation from fossil fuels.
Biden said the ban is intended to “inflict further pain on [Russian President Vladimir] Putin, but there will be costs as well here in the United States.” The further costs that Biden’s ban will have in the United States are most likely to be felt at the gas pumps, where the average price of a gallon of gasoline hit a new record high of just above $4.24 in Massachusetts on Tuesday, according to AAA.
As inflationary forces have driven up the price for groceries and many other household goods in recent months, global events have done the same for energy prices. The average price of gas in Massachusetts is up 61 cents over the last week, 78 cents over the last month and $1.55 in the last year, AAA said, and the price of gas has become a topic of national conversation.
Biden said Tuesday that the U.S. average gas price has climbed 75 cents since Putin began his build-up of Russian military forces ahead of his invasion of Ukraine.
“I’m going to do everything I can to minimize Putin’s price hike here at home,” Biden said in an attempt to place blame for the rising prices at the feet of the Russian president. U.S. Rep. Lori Trahan used the same language in her statement supporting the Biden administration’s suspension of Russian energy imports Tuesday.
“[F]urther insulating Americans from Putin’s price hike is absolutely necessary,” the Westford Democrat said.
In 2021, the United States imported almost 700,000 barrels of crude oil and refined petroleum products per day from Russia and the president’s executive order banning those imports “will deprive Russia of billions of dollars in revenues,” the White House said. Biden outlined a number of near-term steps he said he will take to ease the pain of gas prices, but he and others Tuesday also said the United States should use this as an opportunity to boost domestic energy generation, especially renewable energy.
“This crisis is a stark reminder: to protect our economy over the long-term, we need to become energy independent,” the president said. “It should motivate us to accelerate a transition to clean energy.”
U.S. Sen. Ed Markey used the president’s action Tuesday to call on Congress to take up and pass $555 billion worth of climate and clean energy provisions that were formerly part of the president’s Build Back Better plan.
“This moment is a clarion call for the urgent need to transition to domestic clean energy so that we are never again complicit in fossil-fueled conflict,” Markey said.
Beacon Hill Policy Considerations
Like consumers, the Massachusetts state government has almost no recourse when it comes to surging gas prices. On Monday, Republican gubernatorial candidate Chris Doughty and the Massachusetts Fiscal Alliance called on Bay State lawmakers to suspend the state’s 24-cent-per-gallon gas tax as a way to provide relief to drivers.
Former Rep. Geoff Diehl, a Republican gubernatorial candidate who made a name for himself in 2014 when he led the successful effort to eliminate automatic inflation-based increases in the state gas tax, said he is also in favor of a suspension.
“We’ve seen how much money we saved taxpayers in recent years by rejecting those annual increases; can you even imagine what those increases would be with current inflation rates?” Diehl said in a statement. “Tax relief isn’t the answer to all of our problems and it won’t erase all fuel price increases, but particularly where our state has surplus tax revenue on-hand, it would go a long way toward making Massachusetts a more affordable place to live.”
Asked about rising gas prices on Feb. 28 (when gas in Massachusetts averaged $3.62 per gallon), Senate President Karen Spilka said the issue was “definitely” a concern and suggested that the broad climate bill she has said the Senate intends to consider in the coming months would move Massachusetts further away from fossil fuels.
“It does certainly emphasize the need for us to go electric and take off our reliance on gas and that’s something that I know in the Senate we’re planning on looking at anyway,” she said. “So this really emphasizes the need for electric public transportation and personal transportation.”
The House last week passed an offshore wind bill that Rep. Jeff Roy said would help Massachusetts become more energy independent and less vulnerable to energy price spikes.
The Baker administration has already stated the Bay State’s shift away from gas-powered internal combustion engines and towards electric vehicles as a means to achieve the state’s greenhouse gas emissions commitments.
To hit the state’s 2030 target, about 1 million of the 5.5 million passenger vehicles projected to be registered in Massachusetts will have to be electric vehicles and mid-century commitments will require that all new cars and passenger trucks sold in Massachusetts be zero-emission vehicles starting in 2035, the administration has said.
For Secretary of State William Galvin, the sky-high price of gas signals a need to take a closer look at the prices being charged by middlemen and whether any distributors are taking advantage of consumers in Massachusetts.
“Right now here in Massachusetts, we should be scrutinizing the prices of wholesalers, we should be looking at the price of home heating oil,” Galvin said Tuesday morning on WBZ-TV. “How did you get that price? You are entitled to a fair profit, you’re not entitled to gouge, you’re not entitled to take advantage of an international situation.”
Like the price for gasoline, the price for home heating oil has soared in recent weeks. As of Monday, the average per-gallon retail price of home heating oil was $5.02 in Massachusetts with some prices reaching as high as $6 per gallon, according to the Department of Energy Resources. In the last week, as the heating season has begun to wind down, the average price has jumped more than 25 percent from $4 per gallon as of Feb. 28 and over the last year has spiked 75 percent — from an average price of $2.87 per gallon this week a year ago.
Echoes of the Summer of 2008
About 14 years ago, Massachusetts saw similarly high prices at the pump in the midst of the 2008 presidential election. Gasoline prices hit a then-record $4.08 per gallon on July 7, 2008 — which would be equal to $5.21 per gallon in 2022 dollars, according to the Bureau of Labor Statistics.
Much of the public discussion around the price of gas now echoes the debate that took place in 2008.
“We’re going to change how often we drive and where we drive. We’re going to have to think more seriously about telecommuting,” then-Gov. Deval Patrick said in Salem on July 9, 2008. “We’re going to have to carpool more often.”
Hillary Clinton, then locked into a tough Democratic primary contest with Barack Obama, and eventual Republican nominee John McCain both proposed a suspension of the federal gas tax during the peak summer driving months between Memorial Day and Labor Day to ease the pain of the soaring gas prices.
Obama opposed the idea as a political stunt — he told voters in North Carolina that the three-month suspension “would save you on average half a tank of gas,” Reuters reported — and many economists called it a bad idea that would complicate the problem by fueling greater demand for gas.
Though most of the elements at play were out of Beacon Hill’s collective hands, the Senate Committee on Post Audit and Oversight convened a hearing in June 2008 (about a month before gas prices hit their high point for the year) to scrutinize the impacts of rising energy costs on consumers and the state’s efforts to address the problem.
“It is also imperative that we explore what state level action we can take to try to tackle this crisis, because quite frankly, we’re running on empty,” Sen. Marc Pacheco, who chaired the committee, said at the hearing.
Afterward, the committee reported that the pain at the pump was likely just a preview of the financial distress that was in store when home heating season rolled around and that the state would need to roughly triple what it had been providing for low-income fuel assistance.
This time around, the state’s financial picture is much brighter. The high gas prices of the summer of 2008 coincided with plummeting home values and gave way in the fall to the Great Recession. This year, the Department of Revenue is already sitting on about $1.7 billion in above-expectations tax revenue after having collected about $5 billion more than expected last budget year.