"Right now, a family in America with two cars is saving $100 a month on gas compared to peak prices.  That's breathing room.  And we're not letting up any time soon." 

—President Joe Biden, taking credit for the recent dip in gasoline prices nationwide

Did Biden's strong action reduce the price of gasoline, as he claims?  Well, not really.

Biden claims that his release of oil from the national strategic petroleum reserve — added to his discussions with OPEC — has increased the amount of oil production and thus reduced the price for petroleum feedstock (mainly crude oil) to U.S. refineries.  In actuality, it is the economic slowdown in China — coupled with the increase in Russian oil getting to market (more, in fact, than the NATO countries expected) — that has resulted in a greater availability of oil that has brought about a lower gas price.  OPEC did not respond to Biden's request for increased oil production, and the release of oil from the national reserve is a small quantity on the world market.

Over three million barrels per day of world refining capacity has been shut down, including over 1,000,000 barrels per day in the U.S.  These refineries were the older plants that would require ongoing investment to remain in operation, and, with the Biden administration promising to shut them down, it would be unprofitable to keep them in repair and continue their operations.  The higher $5-per-gallon gasoline price that many were seeing nationwide earlier this summer was more directly related to an inadequate supply of gasoline to meet the surging demand of the summer driving season.  Although all operating refineries ran at their full production capacity of 95% for several months (which is unheard of), they were still unable to meet the higher demand.  The availability of more crude oil as feedstock for refining did not make one additional barrel of gasoline, as all the refineries were maxed out.  This is why oil released from the natural reserve ended up being exported; the U.S. refineries did not have the capacity to process it.

When gasoline hit $5 per gallon, people began to reduce their consumption — which has now fallen 8% below last year's consumption level.  This has allowed the operational refineries to back off to 90% of capacity, which allows them to make some repairs following a long run of operating at full capacity.  The increased supply availability, due to the reduced customer demand, has resulted in the rapid reduction of gasoline prices.

Supply and demand for petroleum will alter the price for the petroleum.  But with the refinery bottleneck between the petroleum and the production of gasoline (caused by the reduction in refining capacity), it is really the supply and demand for gasoline that is setting the price for gasoline. The cost for the feedstock to the refinery currently results in only a minor change in the price of gasoline, given that there is no spare refinery capacity available.

With hurricane season approaching, which typically shuts down refining capacity, and with the numerous seasonal autumn turnarounds, which are scheduled for the off-lining, revamping, and maintenance of oil-refining capacity, the current low prices for gasoline could be short-lived — unless an economic recession acts to reduce demand even further, in which case Joe Biden could claim credit for having had a real impact on the reduction of gas prices.

Dennis Dowling, chemical engineer, formerly of Exxon Chemical Company, is author of "The Electric Vehicle's Dirty Secrets" and "Grocery Shopping with the 'Green New Deal'."

Image: Ben Lunsford.