Business

(NEW YORK) — While sky-high inflation has crunched budgets for essentials like gas and groceries, many large corporations have reported record profits, eliciting anger from some everyday people and public officials over price-gouging.

Such frustration recently rose to the fore over eye-popping gas prices. Earlier this month, President Joe Biden sent a letter to major oil refinery companies accusing them of taking advantage of the market environment to reap profits while Americans struggle to afford gas.

The problem extends well binfeyond gas, according to progressives like Sen. Elizabeth Warren, D-Mass., and Sen. Jeff Merkley, D-Ore., who backed a bill last month that would empower a federal agency and state attorneys general to enforce a ban on excessive price hikes.

But economists disagree over the role that elevated corporate profits have played in driving inflation, as some say they account for more than half of the increase in prices while others say they have caused little or none of the hikes.

Some who do blame corporate price-gouging for a portion of the price increases said it arises from market concentration that allows a handful of dominant companies in a given sector to raise prices without fear of competitors undercutting them with lower-priced alternatives. But others doubt that explanation, noting the unlikelihood that a major shift in corporate concentration took place over just a couple years amid the pandemic.

The divide among economists also owes in part to mixed assessments over whether corporate profits have driven inflation or merely responded to it, since a global market rocked by pandemic-induced supply-demand shocks has created a favorable environment for many companies to hike prices.

“It’s a very intense time for people and their pocketbooks — I understand why these debates are very heated,” Michael Konczal, the director of macroeconomic analysis at the Roosevelt Institute, told ABC News. “A lot of people are on team demand, team supply, team transitory, team corporate gouging.”

“I think there’s reflection that there are a lot of causes,” he added. “Even as those causes are evolving.”

Economists agree that inflation owes at least in part to a supply-demand crunch amid the pandemic in which federal stimulus helped consumers purchase goods at the exact time that they got stuck in a production and distribution bottleneck, experts told ABC News.

But economists disagree over how much that supply disruption has contributed to inflation, as opposed to the market environment that it has created, in which companies could raise prices knowing that their competitors faced similar supply shortages that prevented any of them from flooding the market with cheaper alternatives.

“In the case of sector-wide supply chain issues, as during the pandemic, firms know that their competitors face the same bottlenecks as themselves,” Isabella Weber, a professor of economics at the University of Massachusetts Amherst, told ABC News. “The public, too, is aware of the supply issues. Taken together, this presents a pretext to increase prices.”

Josh Bivens, the director of research at the left-leaning Economic Policy Institute, published a study in April that found corporate profits accounted for more than half of the price growth between 2020 and 2021 in the non-finance corporate sector, which makes up about 75% of the private sector.

But the surge in profits stems from a confluence of factors that is likely unique to the pandemic-era economy, Bivens said.

“I view the big fattening of profit margins that boosted prices as another shock, like the pandemic, like the oil price shock,” he said.

A separate report from the Roosevelt Institute, a liberal think tank, found that companies that imposed higher-than-typical markups before the pandemic were likely to be the same companies that hiked prices during the pandemic, suggesting that certain firms exploited their market position to raise prices during the pandemic. In other words, if a company could mark up prices before the pandemic without fear of competitors, it could do so during it.

“This makes us think there’s a small but real role for corporate power to be involved with the increase in inflation,” said Konczal, the economist at the Roosevelt Institute, who co-authored the study.

But other experts contested the explanation that market power or greed has driven companies to exploit market conditions during the pandemic, arguing that high prices reflect forces of supply and demand rather than any misdeed on the part of a company.

Michael Faulkender, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, compared companies charging high prices to an individual who puts his or her home on the market at a favorable time.

“Let’s say I bought a house five years ago, and I’m looking to sell it for whatever reason. Do I price it at what the market will bear or what I bought it for plus a politically correct predetermined markup?” he said. “I’m going to price it at what the market can bear.”

The high prices at the grocery store or the pump are the expected outcome of a market in which individuals have ample money to spend but few products to buy, Faulkender said.

“The limited supply available goes to those with the highest value,” he said. “The profits then generated are a consequence but not the cause.”

Treasury Secretary Janet Yellen appears to share a view that minimizes the role of corporate profits as a cause of inflation. Earlier this month, at a Senate Finance Committee hearing, Yellen refused an opportunity to blame price hikes on company greed, citing supply and demand as the primary explanation.

Bivens, the economist at the Economic Policy Institute, criticized the value of recent price hikes as market signals, which typically tell market actors where to invest resources. The pandemic-induced shift to goods like Pelotons and lumber and away from face-to-face services is unlikely to persist for a prolonged period, he said.

“The line between price gouging versus useful market signals is always a pretty tough one,” he said. “I don’t think these are useful signals.”

Where economists come down on corporate profits informs what, if anything, they think should be done about it. Bivens said he supports a tax on windfall corporate profits, a version of which was proposed by Sen. Bernie Sanders, I-Vt.., in March. Meanwhile, Faulkender said the government should promote greater supply, especially in the energy sector, as a key way to address high prices.

Personal finances nationwide will depend on the outcome for corporate profits, Konczal said.

“Whether they’re naturally competed away on their own, whether policy intervention is going to help nudge the process along, it does have important consequences for inflation and everyday people’s pocket books,” he said.

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(NEW YORK) — The industry that overwhelmingly uses the most water resources in the West does so for good reason: to provide sustenance for the rest of the country.

Globally, the agriculture sector uses 70% of all freshwater withdrawals. In California, that number is ever higher — at 80% of the state’s public water supply — and farmers are being forced to transform the way they cultivate crops as megadrought that has been plaguing the region for decades intensifies.

California is the nation’s fruit and vegetable basket and grows hundreds of commodities. But about a third of that water is used to grow just three crops: almonds, pistachios and walnuts — industries that amounted to about $9.5 billion in exports in 2020 — nearly half of the state’s total, according to the California Department of Food and Agriculture. Almonds, which use about 1.1 gallons of water to grow just one nut, according to Pennsylvania State University, and account for about 10% of the state’s water use alone, Arohi Sharma, deputy director of regenerative agriculture for the National Resource Defense Council, a nonprofit, told ABC News.

As a warming planet threatens to worsen drought and heat conditions in the West, farmers may be called to grow the crops that will be most resilient in the changing climate, Sharma said. That could include lessening the amount of land and water dedicated to “thirsty nut orchards,” she said.

Planting nut trees at the height of the drought

Tree nuts are an extremely valuable crop, with growers making a “pretty penny” by selling them, Sharma said. Out of California’s $20.8 billion in in agriculture exports in 2020, three of the five most common exports were almonds, pistachios and walnuts, data from the California Department of Food and Agriculture shows.

In addition, the almonds are shelf-stable for about two years, Richard Waycott, president and CEO of the Almond Board of California, told ABC News in an email.

Using figures from the U.S. Department of Agriculture, Sharma calculated that during the height of the last drought, between 2012 and 2017, farmers planted more than half a million acres of new nut trees. Sharma believes the additional plantings were a result in the rise in value of the commodity, combined with the lack of legislation in California that bars farmers from planting drought-intolerant food crops.

“And without limits or caps on water use, growers will take whatever water they save to simply plant new nut orchards,” Sharma said, adding that it will ultimately be government oversight and the implementation of new policies to force the agriculture industry to conserve water.

Those almonds, pistachios and walnut groves have now grown to more than 2 million acres of land in California — out of the state’s 43 million acres used for farming — creating a “disconnect” between the availability of water and the number of acres that are being planted with “these water thirsty, drought intolerant crops,” she said. California almonds had two record shipments in 2020 and 2021, with “steady, significant growth in the years before,” Waycott said.

California, with its Mediterranean climate, is one of the five places on Earth where almonds “can grow at any scale,” Waycott said. The almond industry has been working for decades on making the industry as sustainable as possible, he added, including the development of micro-irrigation now used on 85% of almond orchards in the state, compared to pre-1982 practices that involved flooding the fields or using large sprinklers.

Almond farmers in California have since reduced the amount of water needed to grow each almond by 33% and is committed to another 20% reduction by 2025, Waycott said.

“While almond farmers have made strides on irrigation efficiency, further improvements are underway,” Waycott said.

Reducing water while sustaining crop output

The challenge will be to reduce some of the agricultural land devoted to these crops and make the farms sustainable so they may continue providing jobs and food for the rest of the country, Pablo Ortiz, climate and waters scientist at the Union of Concerned Scientists, told ABC News. In California’s Central Valley, the low-flow drip irrigation technology that was implemented by farmers there did not save water in the end because they instead used the conserved water to cultivate more crops, Ortiz said.

“So, this deployment of technologies needs to be contained by some other policies that would allow you to actually reduce water usage,” he said, instead of using conserved water for other purposes.

The agriculture industry is one of the many sectors in California that are suffering from an antiquated water sector, experts say.

The infrastructure and business models, many implemented in the 1900s, were not created with the forecast of climate change or water shortages. The system of water rights, or legal rights to extract and use a quantity of water from a natural source based on where the property is located, as well as policies such as the California State Water Project and the Central Valley Water Project, which collect water from rivers and redistribute it to cities through a network of aqueducts provide an advantage to some, Sharma said.

“And now we’re facing the repercussions of these very old inequitable water rights systems and water infrastructure,” Sharma said.

The upshot is that farmers, especially longtime landholders are prioritized over other water customers, according to the Natural Resources Defense Council.

Decentralizing water a potential solution

Robert Bartrop, head of global business development for SOURCE Water, a company that builds custom solutions for water needs, told ABC News he envisions a future in which the water industry decentralizes, in a way similar to the telecommunications and energy industries. In that case, investments would be made to redesign the grids to more efficiently distribute water.

In order to prepare for a future with less water, California, and the West as a whole, will also need to transform its water usage in a way that invests and supports its agriculture industry, Sharma said.

Part of this entails ending the practice of massive single crop farming, which depletes the soil of nutrients, Sharma added.

Instead of growing one or two crops over thousands of acres, farmers are starting to grow a variety in 20-acre tracts to protect the health of the soil and prevent erosion, which will make it so farmers, including those who are reliant on the cultivation of tree nuts, are less reliant on one income stream as well, she added.

Farmers will also need to adapt new regenerative solutions, such as building soil health as a drought resiliency tool so that it can hold onto more water despite being watered less, Sharma said, describing regenerative agriculture as a “holistic approach to land management.”

“We need to start diversifying what’s grown on the property as a way to regenerate ecosystems, as a way to fight drought and pest pressures that are coming as a result of climate change,” she said.

The source of the water is important too, Bartrop said. Farmers will need to be more efficient with using recycled wastewater, or gray water, for their irrigation needs, as there is currently too many resources wasted on making water used to irrigate crops and feed livestock potable, he added.

Groundwater, which the agricultural industry in California has been depleting over the past century, is not the solution, Ortiz said.

“With water scarcity and climate change, it’s important to know this isn’t an emergency event,” Bartrop said of current drought conditions and the threat of water scarcity.

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(NEW YORK) — Short-term rental giant Airbnb has issued a permanent global ban on parties following a string of shootings that have broken out nationwide at properties it lists.

The company announced Tuesday that a temporary party ban it enacted in August 2020 over health concerns prompted by the COVID-19 pandemic is being officially codified into its policies.

While the company did not specifically cite the shootings that have occurred during parties at its listed properties, it said in a statement, “Over time, the party ban became much more than a public health measure.”

“It developed into a bedrock community policy to support our Hosts and their neighbors,” Airbnb said in its statement.

The San Francisco-based company said the ban is meant to “deter the very rare cases of Hosts who do not operate responsibly, or guests who try to throw unauthorized parties.”

Airbnb said violations of its party ban will result in “serious consequences” for guests, including suspension of accounts or full removal from the platform.

In 2021, more than 6,600 guests were suspended from Airbnb over violations of its temporary party ban, according to the company.

Airbnb said that after the temporary ban was imposed, reports of parties dropped 44% year-to-year.

“Strong policies must be complemented by strong enforcement,” the company said. “We’ve introduced a number of anti-party measures in recent years to enforce our policy and try, to the best of our ability, to stop both unauthorized parties and chronic party houses.”

Despite the temporary ban, several shootings have occurred at Airbnb rentals across the country.

In April, two teenagers were killed and eight people were wounded when a barrage of 50 gunshots broke out at a Pittsburgh Airbnb rental house, where police said roughly 200 people were having a party. Some escaped the gunfire by jumping out of windows.

Airbnb responded to the Pittsburgh shooting by issuing a lifetime ban against the person who rented the house and filed a lawsuit against them. The company confirmed that an “unauthorized party” was thrown without the knowledge or consent of the house host, who specifically stated in the listing page that no parties were allowed and that any evidence of a party would result in a $500 fee.

The Pittsburgh shooting came just days after a 23-second running gun battle, in which up to 50 shots were fired, erupted during a teenager’s birthday party at an Airbnb rental in Houston that left one person wounded, authorities said.

The Houston incident happened on the same day a shooting occurred at an Airbnb rental house in the Sacramento, California, suburb of Elk Grove that left an 18-year-old man dead, according to the Elk Grove Police Department. Police said the Airbnb rental was being used for a party at the time of the fatal shooting.

On June 11, four men were shot in a drive-by shooting on an Airbnb rental in Detroit that was being used for a bachelor party, police said.

The temporary party ban Airbnb imposed in 2020, also put a cap on the number of people allowed to occupy a home at 16. The company said the new policy removed the occupancy cap on some large homes that have ample room to accommodate 16 or more people, including castles in Europe and beachfront villas in the Caribbean.

“Amazing properties like these thrive on hosting multi-generational family trips and larger groups, and removing this cap is meant to allow those Hosts to responsibly utilize the space in their homes while still complying with our ban on disruptive parties,” Airbnb said. “This decision was made based on feedback from the longstanding and trusted members of our global Host community, and it will take effect in the coming months.”

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(NEW YORK) — Major U.S. companies, including Meta and JPMorgan Chase, on Friday said they will cover travel costs for employees who seek legal abortions outside their home state after the Supreme Court released a ruling that overturned Roe v. Wade.

Several corporations in recent weeks, including Amazon and Starbucks, had announced expanded health benefits to pay for travel fees incurred by workers seeking an abortion if the procedure is unavailable near where they live.

JPMorgan Chase, one of the nation’s largest banks, informed U.S. employees that it will cover the costs of travel for those seeking an abortion who cannot access the procedure legally in their home state, according to a memo sent to employees on June 1 and obtained by ABC News.

The company will begin covering the travel next month, according to a company web page that details the policy. The JPMorgan Chase memo was first reported by CNBC.

A spokesperson for Meta, the parent company of Facebook, confirmed to ABC News that it plans to offer similar coverage of travel expenses for some employees seeking abortion.

“We intend to offer travel expense reimbursements, to the extent permitted by law, for employees who will need them to access out-of-state health care and reproductive services,” a spokesperson said. “We are in the process of assessing how best to do so given the legal complexities involved.”

Tesla, Citigroup, Apple and Salesforce are among the additional companies that in recent weeks expanded abortion coverage for employees to include costs for travel when necessary.

Meanwhile, rideshare companies Lyft and Uber have vowed to provide legal support for drivers if they face lawsuits for driving passengers to get an abortion.

“We believe access to healthcare is essential and transportation should never be a barrier to that access,” a Lyft spokesperson told ABC News in a statement on Friday after the ruling. “This decision will hurt millions of women by taking away access to safe, and private reproductive healthcare services.”

Lauren Hobart, the president and CEO of retailer Dick’s Sporting Goods, said on Friday that the company will provide up to $4,000 to cover the cost of travel for employees — as well as their spouses or dependents — who must travel out of state for an abortion. The company refers to its employees as teammates.

“We recognize people feel passionately about this topic — and that there are teammates and athletes who will not agree with this decision,” Hobart said in a statement. “However, we also recognize that decisions involving health and families are deeply personal and made with thoughtful consideration.”

On Friday morning, the Supreme Court released a 5-4 vote that struck down Roe v. Wade, a 1973 decision that guaranteed a constitutional right to an abortion. In the opinion, Justice Samuel Alito called Roe “egregiously wrong from the start.”

Some business leaders on Friday criticized the Supreme Court ruling and called on their peers to do the same.

Jeremy Stoppelman — the co-founder and CEO of Yelp, which recently announced it will cover the travel expenses for employees seeking abortions — on Friday slammed the decision.

“This ruling puts women’s health in jeopardy, denies them their human rights, and threatens to dismantle the progress we’ve made toward gender equality in the workplace since Roe,” Stoppelman said in a statement shared with ABC News.

“Business leaders must step up to support the health and safety of their employees by speaking out against the wave of abortion bans that will be triggered as a result of this decision, and call on Congress to codify Roe into law,” he added.

Ellevest CEO Sallie Krawcheck, whose company makes an investing app targeted to women, said the ruling carries negative economic implications in addition to its effects on gender equity.

“As CEO of a financial company built for women, by women — with a team of more than 80% women employees — I know the importance of being able to take control of our money, our choices, and our futures,” Krawcheck said on Twitter.

“Reproductive health care access is a human rights issue, but as we’ve seen time and time again, that doesn’t seem like it’s enough to sway certain people with the power to uphold that right,” she added. “How about this: Reproductive rights affect all of us — because it affects our economy.”

The Supreme Court ruling comprises an attack on reproductive rights, said Roger Lynch, CEO of Conde Nast, which on Friday told employees it would bolster health coverage to include travel expenses for those seeking an abortion.

“Today, the U.S. Supreme Court overturned the constitutional right to abortion, allowing individual states to more aggressively regulate or ban the procedure altogether,” he said in the memo to employees. “It is a crushing blow to reproductive rights that have been protected for nearly half a century.”

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(NEW YORK) — A market drop, a price spike and a looming recession — this year has battered the finances of everyday Americans. But some can wait out the misery. Eventually, the market will likely improve, as will debilitating grocery and fuel costs.

Older people and retirees, however, lack the luxury of time. For them, the twin crunch of rising living costs and falling stock returns sounds an especially urgent alarm, straining their budgets while choking off supplementary funds from their portfolios, experts told ABC News.

Typically, financial advisors encourage older people to transition their holdings away from volatile assets like stocks to predictable assets such as bonds, since as one ages, the risk of a major downturn begins to outweigh the reward of sizable gains. Nevertheless, many older people and retirees retain significant stock holdings.

Fifty-nine percent of Americans aged 65 and older own stock either directly or through accounts like a 401(k), according to a Gallup poll updated in May. The share of older people invested in the stock market is slightly larger than the 56% measured in 2021 and the 55% in 2020, though the difference is not statistically significant, Gallup says.

Data on Fidelity’s 21.2 million 401(k) investors shows that — as of late March — more than a third of people aged 60-67 have at least 67% or more in stocks, the financial services firm told ABC News.

By necessity, some older people under financial stress need to sell stock to shore up their budgets, even if they stand to lose potential gains down the road by selling in a down market, experts said. But individuals should take steps to avoid such a choice, if possible, like drawing on other portfolio income like dividends or taking up additional work, they added.

“Market risk is particularly important if you need money soon, as is the case with many soon to retire or already living in retirement,” Rob Williams, the managing director of financial planning and retirement income at Charles Schwab, told ABC News.

“Markets, global-political risk, and inflation are clearly concerning many investors,” he added. “There’s a general fear.”

Retirees typically carry two types of exposure to the stock market: 401(k)s and other accounts sponsored by their employer as well as IRA and other brokerage accounts held away from their employer, Williams said. Americans largely rely on retirement funds, since the share of employers that provide pensions has declined in recent decades.

Oftentimes, investors peg 401(k) accounts to the S&P 500, which has fallen more than 20% so far this year. Investors flocked to funds that tracked the S&P because of its incredible run during bull market that began in 2009 and lasted more than a decade.

Meanwhile, the tech-heavy Nasdaq — which also drew considerable investment due to years of outsized returns — has fallen nearly 30% over that period, and the Dow Jones Industrial Average has dropped about 16%.

Difficult times for the market and the economy may continue, experts said. The Federal Reserve last week raised borrowing costs significantly, hiking its benchmark interest rate 0.75%, the largest increase since 1994. Additional rate hikes will likely follow, Federal Reserve Chair Jerome Powell said.

In theory, the moves should slash inflation by slowing the economy and eating away at demand. But the strategy also risks tipping the economy into a recession.

Even though such economic prospects pose a challenge for older people and retirees, they shouldn’t panic, experts said. “At some point, the business cycle and the market cycle play out,” Mona Mahajan, senior investment strategist at Edward Jones Investors, told ABC News. “You’ll get a down year in equities. Volatility should be expected if you’re exposed to equity markets.”

Whenever possible, older people and retirees should try to weather the potential downturn without a major sell off, experts said.
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“It’s always better to be in the market than trying to time yourself in and out of the market,” Mahajan said. “Investors are notoriously poor at picking market bottoms — or tops, for that matter.”

But older people who rely on their portfolios for regular income will find it more difficult to weather a downturn, said Williams, the managing director at Charles Schwab. For them, it’s of paramount importance that they diversify their holdings, so their day-to-day finances do not depend on volatile assets or segments of the market, he said.

“The less time you have to recover, the more critical it is to have a diversified allocation that limits exposure to individual securities or sectors of the market and with exposure to a mix of cash, bonds, and stocks,” he said.

Older people also benefit from a portfolio that provides alternative sources of income beyond gains in stock price, Williams said. “Investment income in the form of interest and dividends can create a floor of cash flow to avoid having to sell investments, in particular in bear markets,” he added. Dividends from U.S. companies held for at least 60 days are taxed at the capital gains rate, which runs anywhere from 0% to 20%, depending on one’s tax bracket; as opposed to the higher tax rate for personal income.

To be sure, the economy may avert a recession altogether. And the stock market may have fallen nearly as far as it will go, since many investors have already acted in anticipation of additional rate hikes from the Fed.

For now, older people can draw solace from the possibility that the worst in markets has already passed, said Mahajan, the senior investment strategist at Edward Jones.

“In our view, we’re closer to the bottom than we are to the top,” she said.

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(NEW YORK) — While many Americans have noticed sky-high gasoline prices, the lesser-known increase in diesel costs could be what drives the U.S. economy into a recession, experts told ABC News.

Oil prices, which on Wednesday afternoon stood at $105 per barrel, are likely to remain high through November, when they’ll moderate to around $100 per barrel, according to the U.S. Energy Information Administration (EIA).

Elevated diesel prices could persist even longer as heightened demand for diesel outlasts that for gasoline, experts said. Since nearly all products that people consume rely on trucks, trains, and other modes of transportation that use diesel fuel, the already-inflated prices for many goods will prove difficult to dial back in light of those elevated diesel costs, they said.

“No one really notices diesel prices in the U.S. because it’s really only used by industries,” said Damien Courvalin, head of energy research and senior commodity strategist at Goldman Sachs. “But that diesel represents a piece of your plane ticket, a piece of that box of cereal… that price is folded into aggregate inflation.”

The nationwide average price for a gallon of diesel stands at $5.81, which marks a staggering 80% increase since a year ago, when a gallon cost $3.22, according to AAA data. In California, the average price of a gallon of diesel is just below $7 per gallon, AAA data shows.

‘Diesel is my biggest concern’

While gasoline demand may decline leading into a recession, diesel demand often remains elevated, experts said. “In the pandemic we didn’t see diesel demand fall off the way we saw gasoline fall because we all ordered things off of the internet,” said Denton Cinquegrana, chief oil analyst at market research firm OPIS.

Many facets of U.S. industry rely on diesel-fueled transportation of goods, experts said. Typically, overall consumer demand drops during a recession. But diesel demand could remain at high levels in the lead up to a recession, especially in light of the prevalence of e-commerce and home delivery, experts said.

“Diesel is, quite frankly, my biggest concern, even more so than gasoline,” Cinquegrana said. “You could make behavioral changes when it comes to gasoline — you could carpool to work, some of us have the ability to work from home.”

But with diesel, high costs elevate the prices of everyday goods, since the higher cost of transportation is often passed down to consumers. In turn, consumers restrain their spending habits at grocery and other retail stores, slashing demand and exacerbating an economic slowdown, experts said. Consumer spending accounts for about 70% of U.S. gross domestic product.

“Those trucks run on diesel, and those costs get passed on to the consumer — that’s why the price of eggs, the price of milk, beer, go up,” Cinquegrana said. “It’s the price of diesel that kind of breaks the back of the economy eventually.”

Refineries are nearing capacity

The fundamental issue behind the high prices of both gasoline and diesel: demand is high and supply is constrained. Currently, U.S. refineries are producing about a million barrels less per day than they were pre-pandemic, according to the EIA.

In recent years, energy companies have slowed oil expansion in response to a call for fiscal discipline from shareholders. The rise of renewable energy alternatives has also posed a challenge for long-term investment in oil extraction.

While President Joe Biden is set to travel to Saudi Arabia next month, a prospective oil deal likely won’t help the U.S. in the short term.

“Their oil is in the ground,” said Courvalin, the head of energy research at Goldman Sachs. “None of us use that, we need refined oil — it needs to go through the refining process to get what we consume.”

Last week, Biden sent a letter to major oil refinery companies calling on them to take “immediate actions” to increase output. The letter accused the companies of taking advantage of the market environment to reap profits while Americans struggle to afford gas. It mentioned the possibility of Biden invoking the Defense Production Act, which requires companies to produce goods deemed necessary for national security.

But experts told ABC news that U.S. refineries are already near full capacity, and it would take a prolonged period to build new ones. Refineries are “very complex, highly regulated, and very expensive to build,” the EIA said. “Building new refineries to increase capacity is not something that can be done in a short time frame.”

“You have to realize that up until recently, nobody was screaming for more refining capacity in the world,” said Bob McNally, president of Rapidan Energy Group, a consulting firm. “In fact, if anything, refining capacity was starting to look like horses in buggies did in 1908.”

Biden should ‘go further’

The Biden administration’s short term response to the crisis has involved the release of oil from strategic reserves and a call for a gas tax holiday. The long term response has centered around a transition to clean or low carbon energy, but Cinquegrana criticized this proposal as “not appreciating how difficult an energy transition is.”

“What we really need is that higher investment – we talk about refining capacity: if there is none, then I cannot increase gasoline supply,” Courvalin said. “There is nothing the policy can do at this stage.”

The Biden administration has called for a federal gas tax holiday which would temporarily pause the federal gasoline tax of 18.4 cents per gallon on gasoline and 24.3 cents per gallon on diesel fuel.

“On the one hand, yes, it does reduce prices at the pump,” Courvalin said of the potential holiday. “But when you look at it from a commodity perspective, it also means we are still not balancing, just subsidizing what we are running out of.”

The American Petroleum Institute sent the White House its own 10-step proposal to alleviate supply shortages. Their recommendations ranged from lifting development restrictions on federal lands and waters to revising the NEPA permitting process.

“I would go even further,” McNally comments on the letter, “reversing the ban on cross-border pipelines, removing the prospective risk of onerous regulation of oil and gas companies and investment and so forth until we can legislate a proper climate change policy.”

Some of the major energy companies agree.

“In the short term, the US government could enact measures often used in emergencies following hurricanes or other supply disruptions — such as waivers of Jones Act provisions and some fuel specifications to increase supplies,” ExxonMobil suggested in a statement to ABC News.

“Longer term, [the] government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines,” the company added.

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(COLUMBUS, Ohio) — Ohio State University was granted a trademark to use the word “THE” on apparel and merchandise to promote its athletic teams.

The U.S. Patent and Trademark Office had previously rejected Ohio State’s application, claiming the trademark appeared to be for a “merely decorative manner” and as an “ornamental feature” that didn’t function as a trademark that would differentiate the items from others, the Associated Press reported.

The USPTO did not immediately respond to ABC News’ request for comment on the approval.

In a statement to ABC News, the university said “THE” was used by students at the school for years and that it worked hard to “protect the university’s brand and trademarks because these assets benefit students and faculty and support our core academic mission of teaching and research.”

Ohio State said that the school’s trademark and licensing program generates more than $12.5 million a year in revenue and funds university scholarships and programs.

The university filed its patent application in August 2019, months after fashion designer Marc Jacobs filed to use the word “THE” on his products. The USPTO also struck down Jacobs’ application.

Jacobs and the school reached an agreement last year that allows both to use “THE” on their respective products.

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(WASHINGTON) — President Biden on Wednesday called on Congress to suspend the federal gas tax for three months and asked states to suspend their own gas taxes or provide commensurate relief to consumers.

The federal government charges an 18.4-cent tax per gallon of gasoline and a 24.4-cent tax per gallon of diesel. Suspending the tax for three months — through the end of September, will cost about $10 billion, the White House said.

“I fully understand that the gas tax holiday alone is not going to fix the problem,” Biden said in remarks delivered from the South Court Auditorium. “But it will provide families some immediate relief, just a little bit of breathing room, as we continue working to bring down prices for the long haul.”

But the idea may not get the reception Biden is looking for from lawmakers on Capitol Hill.

House Speaker Nancy Pelosi, D-Calif., was noncommittal on the issue in a statement she released after Biden’s announcement. “We will see where the consensus lies on a path forward for the President’s proposal in the House and the Senate,” the statement read.

Sen. Joe Manchin, D-W.Va., told ABC News on Wednesday that he’s not on a “yes” vote as of now.

“Now, to do that and put another hole into the budget is something that is very concerning to me, and people need to understand that 18 cents is not going to be straight across the board — it never has been that you’ll see in 18 cents exactly penny-for-penny come off of that price,” Manchin said.

Biden specifically called on companies to make sure that “every penny” of those savings are passed through to consumers.

“This is no time for profiteering,” he said.

Biden on Wednesday also called on the industry to use profits to refine more oil and gasoline and lower prices at the pump.

“My message is simple to the companies running gas stations and setting those prices at the pump: this is a time of war, global peril, Ukraine,” Biden said. “These are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product to it now. Do it now, do it today. Your customers, the American people, they need relief now.”

The administration has been putting public pressure on oil companies to help Americans at a time of financial need.

“Companies, of course, are beholden to their shareholders, but they really need to be beholden and conscious of customers, and their fellow neighbors, and their fellow citizens, just like this administration’s doing,” another senior administration official told reporters. “And we hope that that’s the spirit that CEOs of these companies will take.”

Energy Secretary Jennifer Granholm is scheduled to meet with oil company executives Thursday, during which they will press executives to ensure they’ll pass on the savings if the gas tax holiday is enacted.

“We are encouraging these oil and gas companies to invest, to help their fellow citizens, to help their own workers,” Granholm told reporters at the daily White House press briefing. “We need them to come to the table.”

When asked about the apparent lack of support for the gas tax holiday from lawmakers, Granholm said there will be ongoing discussions.

“I would hope that both sides of the aisle are listening to their constituents about getting relief,” she said. “I think the citizens will be the loudest voice in the room.”

On Wednesday, Biden also called on state and local governments to provide “relief” to Americans by suspending their state gas taxes or provide other remedies, like delaying planned tax and fee increases, or even consumer rebates or relief payments.

State gas taxes average about 31 cents per gallon of gasoline, according to the U.S. Energy Information Administration.

Researchers at the University of Pennsylvania’s Wharton School recently found that the suspension of gas taxes in Maryland, Georgia and Connecticut were, in fact, “mostly passed onto consumers at some point during the tax holiday in the form of lower gas prices,” but that the lower prices “were often not sustained during the entire holiday.”

In Maryland, 72% of the tax savings were passed on to consumers; in Georgia, 58-65% were, and in Connecticut, 71-87% were, according to their analysis.

When asked why Biden wants the federal tax suspended for three months specifically, the official said the president wanted to balance the need of “the unique moment that we’re in” — particularly during the summer driving season — with the fact that the tax provides important revenue for the government to pay for highways and other transportation projects.

“The purpose of this suspension,” the official said, “is really to address the unique moment that we’re in, and with a particular focus on the summer driving season and the pain that families are feeling at the pump right now, while recognizing that on a longer-term basis, the gas tax is an important source of revenue for federal infrastructure.”

The gas tax revenue goes to the federal government’s Highway Trust Fund, which provides for much of the government’s spending on highways and mass transit.

Biden said his proposal wouldn’t affect the Highway Trust Fund, and an administration official previously told reporters that Congress can fill in the $10 billion gap with “other revenues.”

“I promise you I’m doing everything possible to bring the price of energy down, gas prices down,” the president said.

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(NEW YORK) — For months, sky-high gas prices have bedeviled Americans. The nationwide average price for a gallon of gas stands just under an eye-popping $5 per gallon, AAA data shows.

But a significant policy change may soon offer drivers some relief. President Joe Biden on Wednesday will call on Congress to pass a gas tax holiday that would run through the end of September.

Suspending the federal gas tax, which amounts to 18.4 cents per gallon, would almost immediately reduce the price drivers pay at the pump, experts told ABC News. But they cautioned that the policy would slash funds for maintaining roads and highways, while potentially worsening a supply-demand imbalance and pushing prices even higher in the long term.

“As a motorist, I’ll take any price reduction I can get,” said Patrick De Haan, an energy analyst at GasBuddy. “As an analyst, I think it could exacerbate imbalances that could lead to higher prices.”

What is the federal gas tax?

The federal gas tax, first imposed as a 1 cent per gallon tax in 1932, makes up a portion of the price that drivers see at the pump. The tax gradually increased over the decades after its enactment, reaching its current level of 18.4 cents per gallon in 1993. Since 1997, all revenue from the federal gas tax has gone to the Highway Trust Fund, the major source of federal funding for highways, roads and bridges.

The federal gas tax has never been suspended, though a gas tax holiday was proposed by presidential candidates John McCain and Hillary Clinton during the 2008 campaign.

How would a gas tax holiday work?

A federal gas tax holiday, which would require a law passed by Congress and signed by Biden, would suspend the tax for a temporary duration. The proposal put forward by Biden on Wednesday will call for a suspension through September.

A handful of states — led by both Democratic and Republican governors — have suspended their gas taxes as a means of delivering some financial relief for drivers. Biden on Wednesday will call on states to suspend their gas taxes if they haven’t already.

But the moves only reduce costs by a fraction of the price. In New York, for instance, Gov. Kathy Hochul this month suspended a tax of 16 cents a gallon. With the average price of a gallon of gas in New York standing at $5, according to AAA, the tax relief amounts to a 3.2% cost reduction.

Suspension of the federal gas tax would also reduce the cost of a $5 gallon of gas by less than 5%. Still, consumers would likely prefer some relief to no relief.

What are potential downsides of a federal gas tax holiday?

There are two main potential downsides to a federal gas tax holiday. First, it would deny the federal government a primary source of funding for maintaining roads and highways. U.S. roads received a D grade last year in a report from the American Society of Civil Engineers. Eliminating the federal gas tax would likely leave them even worse off, experts said.

Second, as the U.S. struggles with an imbalance between low oil supply and high demand, a federal gas tax holiday would partially undermine the role that heightened prices play in decreasing consumer demand. In theory, if gas prices remain high or go even higher, people will buy less gas, which should help bring equilibrium between supply and demand, thereby reducing prices.

But a gas tax holiday would almost immediately reduce the price, which could increase demand and worsen the supply-demand balance even further, said De Haan, the energy analyst at GasBuddy.

“It would cause a jolt potentially to demand at a time when it is difficult for refiners to keep up with demand now,” he said.

What happens next?

If Biden decides to support a federal gas tax holiday, it would likely boost momentum in Congress for a law to enact it. But the passage of such a measure remains uncertain.

One such law, the Gas Prices Relief Act, has been proposed by Sen. Mark Kelly (D-AZ). It would eliminate the gas tax through the end of the year, and specifically stipulates that the price savings should be passed along to consumers.

In addition to Kelly, seven senators have backed the bill. So far, no Republican senators have supported it.

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(WASHINGTON) — President Biden will on Wednesday call on Congress to suspend the federal gas tax for three months and ask states to suspend their own gas taxes or provide commensurate relief to consumers, according to the White House.

The federal government charges an 18.4-cent tax per gallon of gasoline and a 24.4-cent tax per gallon of diesel. Suspending the tax for three months — through the end of September, as Biden will call for — will cost about $10 billion, the White House said.

When asked if Biden believes Congress can somehow mandate that oil companies pass on those savings, in full, to consumers, a senior administration official did not directly say but noted there is “some evidence that state tax suspensions, in particular, do get passed through to consumers.” Biden is scheduled to deliver remarks at the White House complex at 3 p.m. ET Wednesday.

The official, in a Tuesday evening call with reporters, said “the president is absolutely calling on companies to make sure that those savings are passed through to consumers.”

The administration is also putting public pressure on oil companies to help Americans at a time of financial need.

“Companies, of course, are beholden to their shareholders, but they really need to be beholden and conscious of customers, and their fellow neighbors, and their fellow citizens, just like this administration’s doing,” another senior administration official told reporters. “And we hope that that’s the spirit that CEOs of these companies will take.”

U.S. Energy Secretary Jennifer Granholm is scheduled to meet with oil refining executives Thursday.

On Wednesday, Biden will also call on state and local governments to provide “relief” to Americans by suspending their state gas taxes or provide other remedies, like delaying planned tax and fee increases, or even consumer rebates or relief payments, according to the White House. An official said Biden wants states to “match” what the federal government would be doing in the short term.

State gas taxes average about 31 cents per gallon of gasoline, according to the U.S. Energy Information Administration.

Researchers at the University of Pennsylvania’s Wharton School recently found that the suspension of gas taxes in Maryland, Georgia and Connecticut were, in fact, “mostly passed onto consumers at some point during the tax holiday in the form of lower gas prices,” but that the lower prices “were often not sustained during the entire holiday.”

In Maryland, 72% of the tax savings were passed on to consumers; in Georgia, 58-65% were, and in Connecticut, 71-87% were, according to their analysis.

A federal gas tax holiday “isn’t going to solve the whole problem,” the official said. “It is something that can be done to take a real step to relieve some of that pain at the pump. And we see it as part of a suite of policies that are designed to provide that relief, including policies that focus on the supply side.”

When asked why Biden wants the federal tax suspended for three months specifically, the official said the president wanted to balance the need of “the unique moment that we’re in” — particularly during the summer driving season — with the fact that the tax provides important revenue for the government to pay for highways and other transportation projects.

“The purpose of this suspension,” the official said, “is really to address the unique moment that we’re in, and with a particular focus on the summer driving season and the pain that families are feeling at the pump right now, while recognizing that on a longer-term basis, the gas tax is an important source of revenue for federal infrastructure.”

The gas tax revenue goes to the federal government’s Highway Trust Fund, which provides for much of the government’s spending on highways and mass transit. Biden believes Congress can fill in that roughly $10 billion gap with “other revenues,” an official said.

When asked if that money would come from last year’s $1.2 trillion infrastructure law, to which Biden signaled openness Tuesday, the official wouldn’t say but did note that there were proposals in Congress that would cover the revenue shortfall.

The official said the administration was “encouraged by the fact” that members of the House and Senate have already made similar proposals to what Biden will call for on Wednesday, but suggested the White House had yet to engage in depth with members of Congress on this topic — saying “we expect to” engage with Congress.

The official also said that all of the policies Biden is proposing — from gas tax holidays to pressuring oil refiners to expand capacity — could, combined, save consumers up to $1 per gallon or more. But that assumption is predicated on steps oil retailer and refiners have yet to show a willingness to take.

“President Biden understands that a gas tax holiday alone will not, on its own, relieve the run up in costs that we’ve seen,” the White House said in a statement. “But the President believes that at this unique moment when the war in Ukraine is imposing costs on American families, Congress should do what it can to provide working families breathing room.”

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