As we have reported on previously, climate change policies have been a focus under the Biden Administration. Immediately after taking the oath of office, the President signed an Executive Order declaring climate change a crisis, initiated a number of climate-based actions, and halted construction of the Keystone XL pipeline. In the subsequent months, national and international pipeline and energy developments have caused increased scrutiny of that decision. While the Biden Administration continues to blame the war in Ukraine and Russia, petroleum and natural gas prices were increasing dramatically well before February 2022.
At this point, with state and national gasoline prices setting new price records each week, one has to ask if President Biden sought to dramatically increase fossil fuel prices to force a transition to renewable energy by the US, what would he and his administrative agencies do differently? While the Biden Administration is frustrated by answering questions about the price of oil and gas, nobody seems to be doing anything to reduce regulation, spur development of domestic energy supplies, or decrease the pain being felt by American families and business.
Regrettably, this situation seems in keeping with Joe Biden’s comments on the presidential campaign trail “I guarantee you we’re going to end fossil fuels.” The President was at a Tokyo press conference on May 23 and let the plan out, inadvertently, by stating “Here’s the situation, when it comes to the gas prices, we’re going through an incredible transition that is taking place, that God willing, when it’s over, we’ll be stronger, and the world will be stronger and less resilient on fossil fuels.” Unfortunately, Biden is not alone, his Interior Secretary Deb Haaland was recently before a Congressional hearing and repeatedly declined to say that gas prices are too high. Not to be outdone, last week Biden’s Special Presidential Envoy for Climate Change, John Kerry, when asked about the need for additional drilling in the US amid high gas prices said “No, we don’t, we absolutely don’t, and we have to prevent a false narrative from entering into.” At this point, the climate change that seems to permeate many facets of the Administration appears to have eliminated common fervor and reasonable decision-making for the benefit of American consumers and business.
As of this column, the price of oil is about $120/barrel. Gas prices are at record highs with an average of $5/gallon, or about $100 per fuel up. The price of gas has now doubled since Biden took office in January 2021. J.P. Morgan analysts are predicting that gas will be over $6/gallon by August 2022. The cost of diesel fuel for transportation, industry, and farming is already well over $6/gallon. The impact of fuel costs has dramatically impacted shipping, food, manufacturing, farming, and every facet of American life.
In response to these issues, Biden’s Energy Secretary Jennifer Granholm stated in a recent interview that high gas prices make “a very compelling case” for drivers to buy electric vehicles. Additionally, the Energy Secretary said that “[i]f you filled up your Electric Vehicle (EV), and you filled up your gas tank with gasoline, you save $60 per fill up [by going electric].” She was not alone, as Congresswoman Debbie Stabenow (D-MI) recently said it didn’t matter how high gas prices are because she drives an electric vehicle. The only fundamental problem with that is that EVs are essentially luxury vehicles unaffordable by most Americans. According to the US Census Bureau, the median household income is $67,521. According to Kelley Blue Book, the average cost of an EV is $56,437 or $10,000 more than the industry average cost of vehicles. In addition, as we have reported on in this column, there are serious infrastructure deficiencies with inadequate charging stations and electrical grid capacity if most drivers were to suddenly transition to EVs as the Energy Secretary seems to be suggesting.
The Biden Administration has done virtually everything possible to restrict US domestic energy production and development. Those actions include: canceling the Keystone XL pipeline that would have provided 900,000 barrels of crude oil per day to US refineries; placing a moratorium on all new federal leasing; and slowing lease sales despite federal court decisions. Incredibly, the Administration has also not issued a new national plan for offshore drilling when the program is set to expire next month. The SEC recently issued a proposed rule that requires public companies to report on climate related risks and emissions. Simultaneously, the -Administration has pressured banks not to lend to the fossil fuel industry. At the same time, the President has blamed the oil industry for not producing more oil and reducing costs.
On June 15, the President once again threatened oil companies, sending a letter to the major producers claiming that “[y]our companies and others have an opportunity to take immediate actions to increase the supply of gasoline, diesel, and other refined product you are producing. My Administration is prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term and to ensure that every region of the country is appropriately supplied.” The letter seems aimed more at the 40-year high of inflation, which just hit 8.6% and is trending up, than producing meaningful results in the energy sector. The letter did not specify when or what the Administration would do via federal action.
In response, an oil industry analyst, Patrick De Haan, penned a succinct Tweet about the situation--“White House begs oil companies to improve situation. Can we drill? We’d rather you not. Can we build a refinery? We’d rather you not. Can we build a pipeline? We’d rather you not. Just make it better.”
Further to that point, Exxon Mobil issued a public statement in response to the President’s letter regarding the company’s investments. The statement noted that it has invested more than any other company to develop US oil and gas supplies. In particular, “[t]his includes investments in the US of more than $50 billion over the past five years, resulting in an almost 50% increase in our US production of oil during this period.” In addition, Exxon stated that around the globe it invested “double what we’ve earned over the past five years-- $118 billion of new oil and gas supplies to compared to net income of $55 billion.” The company also indicated that it has been investing in refinery capacity to process light crude. Finally, the statement noted that the “US government could enact measures often used in emergencies following hurricanes or other supply disruptions, such as waivers of the Jones Act provisions and some fuel specifications to increase supplies. Longer term, government can promote investment through clear and consistent policy that supports US resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for the infrastructure such as pipelines.”
The lack of rationality of these anti-energy policies balanced with the Biden Administration’s attempted actions to reduce prices are striking. On a national security basis, the US is now reliant on international supplies for oil when it was energy independent under the Trump Administration. This includes Russia, Saudi Arabia, Iran, and Venezuela, all countries with dubious politics and no interest in helping the US reduce gas and oil prices. President Biden is headed to Saudi Arabia next month to plead with OPEC for greater energy production. Despite numerous contacts over recent months, OPEC’s production in May fell from prior months.
Similarly, releases of oil from the US Strategic Petroleum Reserve, touted by the Administration in recent months, have had no lasting impact to reduce gas prices. In a time of international instability and the war in Ukraine, degrading the US reserves, which will have to be replaced at much higher costs, seems dubious and aimed at press releases rather than meaningful reduction in gas costs.
In sharp contrast, on June 14 the American Petroleum Institute (API), introduced a plan called “10 in 2022” to increase US energy production. API’s President and CEO Mike Sommers noted that “America is blessed with abundant energy resources that are the envy of the world. Given today’s global unrest and economic uncertainty, American energy is a long-term strategic asset that can advance our national and economic security.” The plan is simple and aimed at boosting energy American energy supplies. API has proposed the following actions: 1) lift development restrictions on Federal lands and waters; 2) designate critical energy infrastructure projects; 3) fix the NEPA permitting process; 4) accelerate liquefied natural gas (LNG) exports and approve pending applications; 5) unlock investment and access to capital; 6) dismantle supply chain bottlenecks; 7) advance lower carbon energy tax provisions; 8) protect competition in the use of refining technologies; 9) end permitting obstruction on natural gas projects; and 10) advance the energy workforce of the future.
Rather than issue a letter to the major oil and natural gas producers that the Administration will work with them to expand production and refinery capacity, President Biden chose to blame the energy industry. If he was serious about solutions, rather than casting blame on others than his Administration’s anti-fossil fuel policies, he would consider real changes to the regulatory and administrative burdens on the industry while keeping reasonable permitting and compliance in place. Unfortunately, what is good for US consumers and business is antithetical to the climate change activists that supported his run for President.
With declining poll numbers and heightened consumer anger over gas prices, the Biden Administration seems intent on placing blame for energy costs rather than finding real, sustainable solutions. Although multiple Administration representatives were asked about the need for additional domestic oil drilling, all declined to support the effort. Nonetheless, the Biden Administration has failed to identify how threats to the oil industry will bend the economic laws of supply and demand. Consumers will know the Administration is interested in solutions when it starts to adopt reasonable regulatory schemes rather than stick with a version of the New Green Deal.
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