Ukrainian Military Forces servicemen of the 92nd mechanized brigade use tanks, self-propelled guns and other armored vehicles to conduct live-fire exercises near the town of Chuguev, in the Kharkiv region, on February 10, 2022. - Russia's deployment for a military exercise in Belarus and on the borders of Ukraine marks a "dangerous moment" for European security, NATO's chief said on February 10, 2022. (Photo by Sergey BOBOK / AFP) (Photo by SERGEY BOBOK/AFP via Getty Images)
Threat of Russian invasion grips US, European markets and Ukraine's economy
03:43 - Source: CNNBusiness
CNN  — 

Here’s an epic plot twist in the American political drama: A President and party that came to office promising to wean the country off oil and gasoline to save the planet are now looking for ways to bring down the price of oil and gas to save a presidency.

How did we get here?

  • First, inflation. The coronavirus pandemic drove up the price of gas.
  • Then, a failure. Democrats could not come together and jam their climate change agenda through a recalcitrant Senate.
  • Now, duty calls. President Joe Biden is rallying world democracies to stand up to Russia before it invades Ukraine, an event that could drive up gas prices even more.

Preparing people for sacrifice. Biden appealed to Americans’ moral compass and sense of duty Tuesday, when he sought to justify standing up to Russian President Vladimir Putin over Ukraine.

“(If) we do not stand for freedom, where it is at risk today, we’ll surely pay a steeper price tomorrow,” he said.

But there may be a price paid today, too.

“I will not pretend this will be painless,” he said.

Quick update on the Russia-Ukraine crisis. The US believes there is no evidence that Russia is removing any of its troops from the border with Ukraine, despite Moscow’s claims that it is.

US Secretary of State Antony Blinken explained things Wednesday on ABC:

“Unfortunately, there’s a difference between what Russia says and what it does. And what we’re seeing is no meaningful pullback.”

He added: “On the contrary, we continue to see forces, especially forces that would be in the vanguard of any renewed aggression against Ukraine, continuing to be at the border, to mass at the border.”

How would an invasion hurt Americans? CNN’s Matt Egan has a listicle that counts six ways the Russia-Ukraine crisis could hurt your wallet.

No. 1: “More pain at the pump.”

He notes that Russia is the second-largest oil producer in the world, behind only the US.

“Supply is already failing to keep up with demand and investors are on high alert for any further supply shortfalls that could occur … in a variety of ways, including damaged infrastructure in a war, sanctions on Russia or Moscow moving to weaponize exports,” Egan wrote.

JPMorgan has warned of $120 or even $150 per barrel crude oil if Russian exports are disrupted. The current price is less than $100 per barrel.

Gas prices are setting records. CNN’s Chris Isidore writes: “Gas in California hit a record high of $4.72 a gallon on average on Wednesday — and experts say a whopping $5 a gallon will likely be the norm there in a matter of months, if not sooner.”

The Russia standoff could drive prices up further, but the hike in California also has a climate change element to it. Isidore notes there are changes on the West Coast in part due to a switch to renewable fuels. That change, necessary to transition away from fossil fuels, is pushing California prices faster than the country’s as a whole. The nationwide average gas price is $3.51 a gallon.

“California is the proxy for what will happen with the energy transition,” Tom Kloza, global head of energy analysis for the Oil Price Information Service, tells Isidore. “A number of refineries have closed permanently. … Getting people away from fossil fuels might be the right thing to do, but it is not without pain.”

When I asked Isidore about gas prices in California, he pointed out that if Biden does want to meet his goal of half of auto sales in the US being electric vehicles, the White House should be thrilled by high gas prices. As gas prices were rising in California, 10% of its car sales were EVs through the first 11 months of 2021 – three times the national average, Isidore said.

Changing their agenda? Democrats – who are already nervous about midterm elections in which Republicans are favored to push them out of the majority in Congress – are considering changes to their policy agenda, according to reports in The New York Times and The Washington Post.

Having failed so far to pass their massive social spending and climate change bill, they could retool to focus on gas prices – including a new push for a federal gas tax holiday – and the skyrocketing deficit.

What is the gas tax and where does it go? The gas tax holiday idea might sound interesting, but it would not do much to affect gas prices.

The federal gas tax of 18.4 cents per gallon pays into a trust fund that finances US highways. The tax was first imposed in the 1930s and it has been set since 1993. It was not raised to pay for the bipartisan infrastructure bill to improve the nation’s roads and bridges, which Congress passed last year.

Few options to control gas prices. When asked on Tuesday about the gas tax holiday, the White House said that all options were on the table but declined to outright endorse the idea.

Press secretary Jen Psaki did not mention it when she was asked what steps Biden could take to combat price increases due to the Ukraine situation. She noted Biden has already tapped the Strategic Petroleum Reserve, a move experts said is mostly symbolic. The other tool Biden has is pressure on other countries.

“He has also engaged, we have engaged with oil-producing countries around the world,” Psaki said. “That’s something we will continue to do because, clearly, we need to ensure that the supply out in the global market is meeting the demand.”

Pressure is not working. The Wall Street Journal notes that Saudi Arabia appeared to snub Biden’s campaign to increase global output. The Saudis are part of OPEC+, a consortium of oil-producing countries that includes Russia and sets oil prices.

RELATED: Biden officials dispatched to Saudi Arabia to discuss energy concerns amid Russia-Ukraine crisis

Even if a gas tax holiday would bring prices down, it would require 60 votes in the Senate – and that seems unlikely. Sen. Joe Manchin of West Virginia, the Dr. No of the Democratic caucus, has already thrown cold water on the idea.

“People want their bridges and their roads, and we have an infrastructure bill we just passed this summer, and they want to take that all away,” said Manchin, according to the Post. “It just doesn’t make sense.”

“A gimmick.” Republicans, despite their usual anti-tax tendencies, are even less supportive.

“I don’t know that there’s a unanimous feeling, but my response is that trying to eliminate the gas tax is basically a gimmick,” Sen. Mike Crapo of Idaho told reporters.

That leaves Biden fearing further hikes, unable to control them and very likely to pay his own political price for the pain Americans feel at the pump. One thing higher gas prices might also do is turn Americans away from fossil fuels toward renewable energy and cleaner vehicles. That’s something everyone concerned about climate change can support, even if it hurts to get there.