Basic Truths About Oil
If Biden were to commit to tapping our oil reserves and expanding domestic energy production, oil markets would respond rapidly.
In 2020, President Joe Biden declared war on oil and gas in America. In a Democratic primary debate, Biden declared, “No more subsidies for the fossil fuel industry. No more drilling including offshore. No ability for the oil industry to continue to drill, period. It ends.” High gas prices are all part of his plan.
The other day, Biden declared that there was nothing his administration had done to raise prices or restrict drilling. Actually, there have been plenty of regulatory measures taken and offshore leases curtailed. More importantly, Biden declared war on fossil fuels.
If you were an investor, would you invest in a company the president of the United States declared he would end? The Biden administration’s entire posture has been against the oil and gas industry, which has fostered uncertainty in the market and disincentivized further investment. They have coupled this with regulatory gusto. They have additionally refused to fight activist Obama-appointed judges using climate change as an excuse to shut down offshore oil drilling.
In a strange bit of optics, as the president was suspending Russian oil imports last week, he requested $2.6 billion for “gender equality” globally. He’s causing American energy price increases and wasting billions on nonsense. Now, he wants to blame the Russian oil imports for high gas prices, which were high before the ban. In doing so, Biden noted American oil producers produced more oil in his first year than in President Donald Trump’s first year.
That is a sleight of hand that highlights just how disingenuous Biden is being. Trump’s first year had been preceded by the oil-hostile Obama administration. Trump got oil flowing again onshore and offshore. Trump’s second year outpaced Biden’s first year. In fact, years two through four of Trump’s tenure each saw more oil produced than Biden’s first year. In other words, the truth is that oil production fell once Biden got in office.
But there is something else. Oil hit $147.90 on July 14, 2008. That was and remains the record high. But oil plunged the next day. By the end of that week, oil prices were down 12%. By November, oil was back to $30 a barrel.
What caused the plunge on July 15, 2008? President George W. Bush announced he was authorizing offshore oil exploration. That’s it. That’s the only thing that happened. News outlets said it would amount to nothing. The Obama campaign team dismissed it as a stunt. It directly caused the price of oil to start declining.
Why? Because oil is bought in a futures market, not a present market. The market responded to the information that more American oil would be coming online by sending prices down.
The United States now has larger oil reserves than either Russia or Saudi Arabia. According to a Los Angeles Times report, “The U.S. is sitting on 264 billion barrels, 8 billion barrels more than Russia and 52 billion more than Saudi Arabia, the dominant member of the Organization of Petroleum Exporting Countries (OPEC), according to the report by Rystad Energy, a respected oil and gas consulting firm based in Oslo. Three years ago, the U.S. was behind Russia, Saudi Arabia and Canada in Rystad’s estimates of recoverable oil — barrels that are technologically and economically feasible to extract.”
If Biden were to commit to tapping our oil reserves and expanding domestic energy production, oil markets would respond rapidly, just as they did in 2008.
Instead, even now, his administration dogmatically demands Americans switch to electric vehicles and get off fossil fuels. His administration continually signals that they will put the fossil fuel industry out of business. They thereby disincentivize investments in oil and gas, driving up costs on the American people.
Decline is a choice, and it is one Biden’s administration is making on the backs of the American middle class. Their Marie Antoinette moment of “let them have electric vehicles” is going to provoke a backlash. They can blame Russian President Vladimir Putin all they want. Banning imports of Russian oil was the right thing to do — but it should responsibly be done by expanding American energy production instead of relying on Venezuela, Iran and Saudi Arabia.
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