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In the summer of 2022, President Joe Biden had a problem. Gas prices had been soaring for most of 2021 and 2022, due to a combination of overhang from reduced production during the height of the Covid-19 pandemic and the Russian invasion of Ukraine. And American voters hate when gas prices go up. Biden’s approval rating plunged over his first two years in office. He needed some kind of policy response to address the problem and prevent his party from getting slaughtered in the midterms.
The plan he ultimately arrived at entailed massive releases from the Strategic Petroleum Reserve combined with a new policy of buying oil futures to provide producers with an incentive to pump more in the near to medium term, preventing another shortage from arising. This approach followed very closely a proposal put out in March by the advocacy and research group Employ America, written by its executive director Skanda Amarnath and his colleagues Alex Williams and Arnab Datta. The Employ America plan explained how the administration could use the petroleum reserve to durably lower gas prices, while also setting a price floor so the cost of gas didn’t fall so far that it imperiled the transition to electric vehicles and renewable energy.
And then… gas prices fell. While teasing out causality is hard, it’s likely both the petroleum releases and the new futures approach played significant roles in this turnaround. And as counterintuitive as it sounds, this news is a triumph for the fight against climate change. If the gas price problem had worsened, the result likely would’ve been a Republican landslide in the midterms ending the possibility of any meaningful US action on climate change at all. Instead, the fall in prices coincided with Sen. Joe Manchin’s decision to pass hundreds of billions of dollars in climate subsidies. Without signs inflation was abating (signs like the falling gas prices), it’s doubtful Manchin would’ve come around and become the climate hero he became.
All this news also represents a major triumph for Amarnath and Employ America, which launched only three years ago. Most of the group’s work focuses on the Federal Reserve, pushing for the institution to prioritize job creation ahead of a narrow focus on preventing inflation. And Employ America and its allies essentially won that fight, as the Jay Powell-led Fed bumped trillions into the economy in 2020 and effected, by far, the fastest fall in the unemployment rate the US had ever seen. Amarnath became a ubiquitous presence in business media, pushing on a staid audience of financiers the notion that sustaining a high-employment economy is not only possible, but desirable.
Amarnath and Employ America were put in a bit of a bind in 2021-22, as the inflation problem in the US became increasingly severe. That reality threatened to discredit the ideal of a high-pressure, high-employment economy that the group had embraced and lobbied for, by suggesting that employment rates this high could only be sustained through rapid price increases. Many groups, in such an environment, would feebly deny there’s a problem and dig themselves in deeper. Amarnath and co. did not make that mistake. Instead, they devised policies like the Strategic Petroleum Reserve plan to reduce inflation without reducing employment too, making themselves useful to policymakers and helping rescue their vision of the economy in the process.
Key to the group’s powers is its obsession with the arcana of how institutions like the Strategic Petroleum Reserve or the Fed actually work, producing a depth of knowledge that lets them propose solutions that are genuinely novel and which figures like Jay Powell or Treasury Secretary Janet Yellen cannot get from anyone else. Amarnath, who was a founding staffer and recently took over the executive director job from fellow founder Sam Bell, was a key factor in building out that strategy and executing it. If you have saved money at the pump lately or if you care about keeping unemployment and inflation both low, you owe him a bit of thanks.
