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Inflation: ‘Putin’s price hike is showing up in gas prices,’ WH economic adviser says

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White House Council of Economic Advisers Member Jared Bernstein joins Yahoo Finance Live to discuss the price surge across oil and gas markets and how the Biden administration is responding to inflation.

Video Transcript

AKIKO FUJITA: We've got Jared Bernstein, White House Council of Economic Advisers, he's a member there. And Jared, it's always good to have you on the show. As we noted, these are February numbers, a lot of people looking to see how much worse things can get as a result of the commodity spikes that we've seen with-- as this war between Russia and Ukraine plays out. What's the White House's read?

JARED BERNSTEIN: First of all, it's nice to be here with another Jared. Although, we do have some Jared inflation on this show. So we're going to have to be careful about that. I think the most important point that we've discussed so far in this segment is the extent to which the invasion, Putin's price hike is showing up in gas prices.

Energy explains a third of the increase in the headline CPI this month, that 0.8% increase. And while the vast majority of the increase in oil prices occurred after the February CPI data were collected, so more of a March story, there is some of that in there. This report is not completely by any means purged of those pressures.

So that is something that's going to persist in these data and the president has been very forthright about it. He also recognizes of course, though that we have to do everything we can to try to help the American people who are dealing with this challenge in their everyday budgets. And we have an extensive agenda in that regard that I'm happy to discuss.

JARED BLIKRE: And Jared, well, I'll just bite there. And by the way, this Jared inflation is transitory, it's only going to last the length of this interview. But I'll bite, can we follow up on what you're talking about here?

JARED BERNSTEIN: Yeah. So for example, the president has discussed beginning last week in coordination with our allies, the securing of a release of 60 million barrels of oil from our strategic reserves. We've done this in the past pretty recently and it fairly quickly took the price of gas down at the retail pump. Now it is not, by any means, a permanent solution, but it does help in the near term [INAUDIBLE] some of the cost pressures at the pump.

Longer-term, we're pushing for investments, the bipartisan Innovation Act, which is something the president would like to get to his desk as soon as possible, would help to onshore more production, strengthen our supply chains, move goods to our markets at a lower cost. And of course, we're working with oil-producing and consuming countries to do everything we can to boost the supply of oil as well. So those are a few of the steps we're taking.

Broader-- in more broad terms, we have a supply chain agenda that is ongoing. It was very much in place before the invasion and continues to help move goods from ship to shelf. And the president is also pushing the Congress on his plan to lower the cost of essentials to family budgets like prescription drugs, and the cost of health insurance.

AKIKO FUJITA: Jared, let me follow up on that point on energy, at least with domestic production because it does feel like there's a bit of finger-pointing that's happening publicly. On the one hand, you've got the oil and gas companies who are saying, look, we want the blessing of the White House, of our shareholders, to bring more rigs online at a time when we've been told that oil and gas is not the future. And yet, we've also heard from the president who says, look, there's 9,000 permits out there, if they wanted to drill right now they can. Does the White House believe that these energy companies are staying put because it's more profitable to do so?

JARED BERNSTEIN: Well, there's definitely some of that going on. And the companies themselves will tell you under the rubric of what they often call quote, capital discipline, that they're resisting making investments. I mean, this is a-- this is an industry that back in April of 2020 where crude producers were paying refiners to take oil from them. So there have been considerable ups and downs here.

What we and the president has talked about is expecting companies-- and not just the big publics but the privates, the smaller privates as well, to respond to price signals. And these price signals are very strong. And to the extent that they're not doing so, to the extent that gas prices are going up more quickly than the usual lag between oil and gas producers, we're going to be watching that very, very closely.

AKIKO FUJITA: There's another dynamic that the president has pointed to, which is the fact that 90% of onshore oil production happens on private land, it's not necessarily federal land. With that said, what can the White House do to incentivize more production and how do you see that dynamic playing out when you know, we've heard from every company who says, look, if we bring more rigs online, it's going to take several months at the very least.

JARED BERNSTEIN: Well, one of the things that we can try to do. And I talked about it a second ago, is bridge that gap in time by releasing oil from the strategic reserves. And you've heard from the International Energy Agency that this is very much a coordinated play with our allies to do so. And we think that we can help bridge that gap but yes, the companies very much have to step up. We've emphasized that.

The idea that this is a permitting problem is false. OK, there are 9,000 active unused permits out there. These companies could certainly drill and produce more oil. And obviously, if you've listened to the president, he has urged them to do so. But this remains a global commodity and we're talking to producers obviously, non-sanctioned ones, producers across the globe.

But the other thing the president has emphasized is that if this moment doesn't clarify the importance of reducing our dependence on fossil fuel and thereby petrostate brutal dictators who hold that, then you know, people just aren't paying attention. We need to do two things here, to walk and chew gum big time, which means making sure that we help consumers transition to a cleaner energy economy but also aggressively pursuing the path to that economy, both in terms of building those sectors, those jobs in our own economy, but also providing clean alternatives to fossil fuels that are clearly and intimately tied to geopolitical risks that we're seeing play out in real time.

JARED BLIKRE: And Jared, just thinking about the bigger picture here, a couple of days ago after the US announced sanctions on Russia whereby oil imports would be banned, Russia in turn, said there were going to review their commodities export list and basically banned 15 of their own commodities. Are we in a position, is the US in a position to not-- to secure its supply lines for any one of these commodities that Russia is a major exporter of? And that we need for our supply chains, a lot of these companies that we need these products from simply can't find them already.

JARED BERNSTEIN: Well, first of all, you're introducing an important point that can get lost in this discussion. We're so focused on energy, that we mustn't forget about other commodities. Food, of course, is a critical one but also commodities like nickel, and palladium, other metals. I think food, in particular, is critical for particularly countries in the areas around Ukraine and Russia. Egypt, for example, is highly dependent on wheat and grains from those two countries. We are less so but this too-- these too are global commodities.

And we at the White House I can guarantee you are very aware and are tracking closely any kinds of shortages that might impact both our producers, but also the well-being of our allies and countries with whom we sympathize. One thing I can tell you is that it certainly looks to me like the supply elasticity for food is larger than that for energy. That is energy capacities are extremely tight, food are tight as well but perhaps less so and so we have much to do in that space as well.