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Gas prices: ‘We’re doing everything we can’ to lower costs, WH official says

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Jared Bernstein, a member of the White House Council of Economic Advisers, weighs in on inflation's impact on oil prices and what the administration is doing to help offset it.

Video Transcript

- Welcome back to Yahoo Finance Live, everyone. The president announcing today that the EPA Administrator plans to allow E15 gasolines to be sold this summer. The gasoline type uses a 15% ethanol blend and is the latest affordable fuel supply effort from the White House. And that as the latest consumer price index data reveals continued pressure at the pump leading up to the simmer travel season.

For more, right now we have joining us Jared Bernstein, who is the White House Council of Economic Advisors Member. Great to have you here with us today, Council Member. What net effect does the White House calculus believe that this effort will have on the fuel cost pressures that are showing through the economic data?

JARED BERNSTEIN: Well, our estimate is that this waiver allowing stations that happened to be particularly located in the Midwest, could shave around $0.10 a gallon off the price of gas through increasing the supply through allowing the sale of E15 ethanol between June and mid-September. That has to be added to the impact of the release of oil from the strategic reserves. I think probably this audience is quite familiar with President Biden's release of a million barrels a day for six months, 180 million barrels in total, from the strategic reserves.

Probably less familiar is the fact that he has now worked with some of our partners and other economies we trade with to kick that 180 up to 240 million barrels. If you look at the impact of that already on oil and gas prices, you can see that in the data. So basically, we're doing everything we can to try to help relieve some of these price pressures at the pump.

- Nice to see you. Jared Brown, of course mentioned the CPI data out. 8.5%, the rising inflation has been the signature issue in the economy. And that shows in the polls. The president at 42%. 33% on his handling of inflation. Jen Psaki, the White House Press Secretary asked about that ahead of the data release. Here's what she said.

JEN PSAKI: We expect March CPI headline inflation to be extraordinarily elevated due to Putin's price hike. And we expect a large difference between core and headline inflation reflecting the global disruptions in energy and food markets. Core inflation doesn't include energy and food prices. Headline inflation does. And of course, we know that core inflation, energy, the impact of energy of course, on oil prices, gas prices, we expect that to continue to reflect what we've seen the increases be over the course of this invasion.

- Inflation of course, has been soaring since President Biden took office. And COVID certainly played a role. Supply chain issues played a role. And certainly the trillions of in stimulus that the Democratic Congress put out in the economy. Is it oversimplifying things to call it the Putin price hike?

JARED BERNSTEIN: I don't think so in the following sense if you look at inflation in the report we got this morning that's the CPI for March over the month inflation was up 1.2%, 70% of that increase, a full 70% of the increase in that monthly inflation rate is attributable to energy prices. And 63% is attributable to gasoline itself, which was up historically very steeply over the month. That is very directly connected to Putin's unprovoked invasion of Ukraine.

I don't think that's a particularly debatable point. Now, if you want to argue that the broader inflation that's been going on in this economy since we've seen very strong demand interact with insufficient supply, and I agree with you that has a lot to do with the pandemic and those impacts are still ongoing. Sure, that predated the invasion. But Jen is I think spot on when she's reflecting on what we see in today's report regarding energy and gasoline in particular.

And again, my earlier comments reflected on some of the actions that we're taking here to try to lower prices at the pump, which by the way, are down about $0.11 or $0.12 per gallon in April. This of course, was a March report.

- So with that in mind then obviously you do have this inflation number. But when people are paying for their gas even though we are seeing the prices come down, but they're also seeing food prices elevated, it can be hard to feel like you're doing well economically. How does the administration plan to really change this, perhaps this narrative, especially going into a midterm election year?

JARED BERNSTEIN: Well, you know when people ask me how to change a narrative, I have very lamely have to just say you know, I'm an economist. And I think about data. And I guess that a smart narrative is one that's informed by data. And so let me tell you something that I think is getting a little bit lost in this discussion.

As you well know, you talk about this a lot at Yahoo Finance, we have one of the tightest labor markets ever, ever. We have historic job creation numbers, almost eight million jobs since this president got here. We have labor demand that's as strong as I've seen it. And I've been looking at this for decades.

We have an unemployment rate at 3.6%. If you actually look at the labor market opportunities people face, and you look at that in the context of commodity prices, you'll find that what really hurts households and economies is not just high commodity prices, food and energy, but it's relative to their incomes, relative to their earnings.

And here, the strong labor market is really a tailwind just because it's so much in our scope that we don't necessarily often appreciate it in this context. Again, look through history where high commodity prices have really damaged an economy, you'll see it's a time when the labor market hasn't been providing people with some of the incomes they need to help meet those prices. Now, none of that excuses us from trying to do much better on the economy supply side and relieving these household constraints.

But let's not leave out that it's not just commodity prices. It's prices relative to earnings and income. And in that regard, households are doing better.

- What hurts future household growth as well though is high debt in comparison to income. Should inflationary pressure persist beyond the Federal Reserve and even the White House targets, is there a point where the economic advisors would elevate the recommendation to the president to even cancel a percentage of student loan debt perhaps, which the president campaigned on and has repeatedly pushed the timeline for reassumption of the responsibility for borrowers back?

JARED BERNSTEIN: Well, of course, what the president campaigned on, is very much a legislative endeavor, and so we continue to work with legislators on these issues. We've actually done a great deal in terms of rule changes, in terms of extending the pause in student debt payments to help hundreds of thousands of borrowers get through this period. But here's again speaking from a macroeconomic perspective, and getting back to the point I was making a second ago, about the issue that it's not just high prices, it's price is relative to incomes.

Here we actually, if you go in and look at the data, you will see that household debt burdens are at historically low levels and that household net worth is at historically high levels. This is what we mean, when we say household balance sheets are in good shape. Now look, I really don't want to come across at all as if I'm being even the slightest bit unsympathetic or dismissive to what households face.

We are working as hard as we can to alleviate supply side pressures, whether it's at the pump, whether it's in the ports, whether it's getting goods from ship to shelf, to try to help families make ends meet. But it's really important to think about the backdrop here and how families would be doing if we didn't have healthy balance sheets, if we didn't have a 3.6% unemployment rate, if we didn't have millions of job openings helping to create strong labor demand and good worker bargaining power.

All of those have to be considered in the mix. If you try to reduce this economy to one variable, the rate of inflation, you're missing a whole lot.

- Well we do thank you so much for joining us this afternoon. Jared Bernstein, the White House Council of Economic Advisors Member. Thank you so much.