White House plan to send gas rebates complicated by chip shortages

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Senior White House aides having in recent days discarded new ideas for responding to high gas prices and looked again at some that they had previously discarded, desperate to show that the administration is trying to address voter frustration about rising costs at the pump.

Biden officials are taking a second look at whether the federal government could send rebate cards out to millions of American drivers to help them pay at gas stations — an idea they examined months ago before ruling it out. Aides had found that shortages in the US chip industry would make it hard to produce enough rebate cards, two people familiar with the matter said. White House officials also fear there would be no way to prevent consumers from using them for purchases other than gasoline, according to another person familiar with the discussions. Even if the administration embraces the proposal, it would probably require congressional approval and face long odds among lawmakers wary of spending more money.

Biden aides have also looked in recent days at invoking the Defense Production Act to move diesel and other refined products should localized shortages materialize, two people familiar with the matter said. Diesel prices have risen markedly, posing a major threat to the nation’s trucking and shipping industries, although experts say they appear to remain unlikely for shortages now.

The revived brainstorming reflects how higher fuel costs have emerged as one of the Biden administration’s chief political threats and a serious hurdle for the economy overall. The White House has taken a number of actions to try to address the problem, such as committing to a historic release of the nation’s oil reserves and, on Wednesday, sending a letter to the nation’s refineries calling for more production and criticizing their profits. President Biden has also tried to increase production internationally, producing the world’s oil producers and coordinating the release from national reserves with US allies.

But those measures appear not to have helped substantially. The average gas price nationally rose above $5 a gallon for the first time this weekend, a roughly 11 percent increase from just last month, according to AAA. (The average ticked down very slightly both Thursday and Friday, but it remains at $5.) Polling suggests widespread frustration with rising prices, increasing the likelihood that punishes Democrats this fall and give Republicans control of at least one house of Congress next year.

White House officials have scrambled in recent days to review all potential federal policy responses. Officials have also discussed telling governors to lower or waive their gas taxes, another person familiar with internal administration discussions said.

States eye gas tax breaks as fuel prices soar

The people, who spoke on the condition of anonymity to discuss private talks, stressed that these measures were being explored in a preliminary way and that in the end decisions had been made.

The attempts to explore out-of-the-box solutions to high energy prices reflect the paucity of available solutions to the administration, as well as the extent of the challenge they pose. White House spokesmen have said all options are on the table, but one White House official said the rebate proposal — pushed by some Democrats in Congress — was unlikely to advance due to the logistical difficulties. Critics also say the idea could backfire by further pushing up prices by adding to consumer demand.

Other proposals floated by policy experts include suspending the Jones Act, which would reduce shipping costs and make it cheaper to get gasoline from the Gulf Coast to the Eastern Seaboard, imposing price controls and banning exports of US energy. But all these ideas have their own political and practical downsides, with the Jones Act supported by influential union groups, and economists warning that any supply restrictions could exacerbate the problem. One person said the White House has also looked at limits on fuel exports, an idea first reported on Thursday by Bloomberg News.

“Not only is there not an extant solution, but nobody thinks there’s going to be a compelling solution,” an outside economic adviser to the White House said. “They’re fighting about narrative rather than fighting about substance, because realistically, what are they going to do?”

Inside Biden’s frustration with soaring prices

Biden on Wednesday defended his administration’s record, arguing it is doing everything possible to lower families’ costs — including at the pump — in the face of immense head winds.

“I’m doing everything in my power to blunt Putin’s gas price hike,” Biden said, referring to Russian President Vladimir Putin. “We’re going to work to bring down gas and food prices. We can save families money and other items.”

The run-up in gas prices has many factors, but it was intensified by Russia’s invasion of Ukraine and subsequent Western sanctions on the Kremlin, which disrupted supply from what had been the world’s third-largest oil producer. Russian output has fallen by more than 1 million barrels per day due to export sanctions that complicate sales and import sanctions that hurt production, according to Rory Johnston, an analyst at Commodity Context. Refineries necessary to turn oil into gas and other products are stretched to their limits, with Russian refineries knocked offline and US refining capacity down roughly 5 percent, according to the Energy Information Administration.

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