Holiday Gas Prices: Why They're Up, What the Biden Administration Is Doing and When They Should Drop

"The economy is turning back on and the supply hasn't kept up with demand," Energy Secretary Jennifer Granholm tells PEOPLE

Gas pump. Photo: Getty

As the global economy continues to recover from the worst of the pandemic-fueled slowdown, American consumers are feeling the pinch of elevated gas prices at the pump — at one of the busiest travel times of the year, no less.

As people return to work and the way they lived their lives before the spread of COVID-19, the demand for oil and gas has skyrocketed in the U.S. and elsewhere around the world.

Supply, meanwhile, has slumped.

Joe Biden's administration is currently taking steps in an effort to curb a problem that has become both economic and political, fueling criticism amid broader inflation fears and a supply chain crunch that is seen as one force weakening the president's approval, despite good job numbers.

On Tuesday, Biden said he would tap into the U.S. oil reserves to increase supply. Still, it remains to be seen exactly what that will mean for consumers.

Here's more about why gas prices are so high right now, and what steps are being taken to lower them.

Why are gas prices high right now?

"Fundamentally, this is about COVID," Deputy Energy Secretary David Turk tells PEOPLE. "So much of what's impacting our economy these days is. What we had early in the pandemic was demand go way down. Especially with less people driving. So prices cratered … we actually had negative prices for oil for a while."

But even when demand shot up, production had slowed, both as a result of less demand and due to the restrictions of the pandemic. (Biden has disputed the view that part of the production issues are being driven by Saudi Arabia and others, perhaps over policy disputes.)

Are high gas prices only impacting the United States?

The pandemic impacted every part of the globe, meaning consumers elsewhere in the world are also seeing higher oil and gas prices.

"This is a global issue — oil is sold on a global market and of course the entire globe has gone through COVID," explains Energy Secretary Jennifer Granholm. "Because the demand was so low, when everyone was staying inside, the prices dropped to the floor."

Now, they've shot up and the U.S. isn't alone in trying to rectify the problem.

"The economy is turning back on and the supply hasn't kept up with demand," Granholm tells PEOPLE, adding: "It's one of the reasons the president reached out to other countries to see if they would be willing to release their reserves as well."

Indeed, China, Japan, India and the U.K. are also releasing oil from their reserves in an attempt to help lower global oil prices.

What Is the Biden administration doing?

The White House on Tuesday announced the Department of Energy would release 50 million barrels of oil from the Strategic Petroleum Reserve — an effort to increase supply during a time of increased demand.

Biden officials say the plan works in two ways: first, 32 million barrels of oil from the reserve will be an exchange over the next several months, meaning the oil will eventually return to the reserve in the years ahead.

"An exchange allows us to put oil in the market now, shaving off the high part of the curve, and then a year, two years, three years later, we get a premium," says Turk, the deputy secretary.

The other 18 million barrels of oil will be sold "in a more traditional, direct sale" that will take place over the next several months as part of an accelerated plan that Congress had previously authorized, Turk says.

The result, the administration believes, will be lower gas prices (and lower heating bills) for American individuals and businesses.

"This is the largest release of our strategic petroleum reserve ever because we want to make sure that we relive the prices at the pump," Granholm says. "If you add more supply to the market, of course prices generally come down."

When might Americans start seeing lower prices?

Granholm says lower gas prices should appear at pumps "over the next few weeks," provided things proceed "as they normally do with respect to making supply available."

But it's unclear just now "normal" things are. Though the price of oil began to fall in late October (and has fallen since) in anticipation of oil release announcements, prices at the pump still don't reflect the trend.

As Turk notes, a key marker of oil prices — the WTI crude index — has gone down, "from $85 a few weeks ago, as discussion have taken place, to $78 or $79 today."

But even so, "what everybody wants to see is a decrease in what they pay at the pump," Turk says. "The price at the pump tends to lag by a few weeks. So we hope the price at the pump will go down and continue to go down into 2022."

So far, it hasn't. The Biden administration is looking into why. Meanwhile, the president — though far from the first one — continues to face ire for the pump price hikes.

"We're in an unusual situation because at this moment, the price at the pump has not reflected the price of wholesale gasoline," Granholm says, adding that, "If things were progressing as they normally do, gas would be 30 cents less [already]."

Last week, Biden asked the Federal Trade Commission to investigate the potential role of oil and gas companies in rising gasoline prices to determine whether something else might be at play. (One expert told USA Today such a move misplaced the blame for the prices and that the president ultimately has limited influence over such tings.)

Still, prices are expected to go down ... even if they haven't just yet.

Turk points to similar efforts undertaken by the U.S. in 2000 to combat high gas prices. In that case, he says, costs for American consumers did go down after the U.S. dipped into its reserves.

"We are certainly hoping for that again," he says, noting that the benefits (i.e. lower gas prices) should extend to every part of the U.S.

"It's a market, so supply should catch up to demand," Turk says. "That's what everyone is expecting to take place in 2022. We're just trying to expedite that process."