Point/Counter-Point on Oil Prices

At MSNBC Hayes Brown declaims that blaming higher oil prices on President Biden is just a political ploy:

Vox’s Rebecca Leber put together a great roundup of the myths that Republicans have been touting, including their claim that Biden choked off oil production and that it’s Democrats who aren’t “flipping the switch” on more production. As Leber noted, oil companies are the ones who won’t be ramping up production anytime soon. The industry is still trying to recover its losses from during the pandemic, when demand for oil cratered and prices briefly plunged to negative levels. Likewise, while the number of active rigs in the U.S. continues to rise after that 2020 crash, oil companies, like most other industries, are struggling to hire workers and procure equipment amid the ongoing supply chain backlog.

The demand for oil is back to pre-pandemic levels, potentially increasing the price of products across the board — and nobody likes to be in charge when Americans’ costs go up. That was true during the George W. Bush administration when the price of crude oil hit $145 per barrel in June 2008 as worried investors looked for a safe haven. (It didn’t work.) And it was true under former President Barack Obama when demand recovered after the 2008 financial crash and the ensuing Great Recession.

Crude oil was trading around $126 per barrel Tuesday, 58 percent higher than the roughly $80 per barrel it was at before Russia’s aggression against Ukraine roiled the market. That price, which makes up over half the total cost per gallon of gas, is based on global demand — something Biden has even less control over than how much your local Exxon station charges.

The U.S. Energy Information Administration shows American production of petroleum to be near its pre-pandemic high, while crude oil production specifically should hit that benchmark next year. And it’s worth noting that the U.S. spent the last two years as a net exporter of petroleum — but is forecast to increase its crude oil imports. So while America pumping more oil could help meet domestic consumption needs, global demand is something the U.S. can do little about, absent asking OPEC countries to pump more crude.

while the editors of the Wall Street Journal try to explain the relationship between the administration’s policies and higher prices:

On Tuesday he even blamed U.S. companies—not his policies—for not producing more. There are 9,000 available unused drilling permits, he claimed, and only 10% of onshore oil production takes place on federal land. Talk about a misdirection play.

First, companies have to obtain additional permits for rights of way to access leases and build pipelines to transport fuel. This has become harder under the Biden Administration. Second, companies must build up a sufficient inventory of permits before they can contract rigs because of the regulatory difficulties of operating on federal land.

It takes 140 days or so for the feds to approve a drilling permit versus two for the state of Texas. The Administration has halted onshore lease sales. Producers are developing leases more slowly since they don’t know when more will be available. Offshore leases were snapped up at a November auction because companies expect it might be the last one.

Interior’s five-year leasing program for the Gulf of Mexico expires in June. Yet the Administration hasn’t promulgated a new plan. Nor did it appeal a liberal judge’s order in January revoking the November leases. But the Administration has appealed another judge’s order requiring that it hold lease sales.

Then there’s the not-small problem of financing. Companies can’t explore and drill, or build pipelines, without capital. Biden financial regulators allied with progressive investors are working to cut it off. The Labor Department has proposed a rule that would require 401(k) managers to consider the climate impact of their investment holdings.

The Securities and Exchange Commission is expected to issue a rule requiring companies and their financiers to disclose greenhouse gas emissions. Mr. Biden has nominated Sarah Bloom Raskin, of all people, to be the Federal Reserve’s top bank supervisor. Her top priority is using bank regulation to redirect capital from fossil fuels to green energy.

Large energy producers are buying back stock and redirecting capital to renewables because they see the Administration’s writing on the wall. Small independent producers are eager to take advantage of higher prices but can’t get loans. Many relied on private equity during the last shale boom, but now these firms are cutting them off.

Progressive outfit Global Energy Monitor gleefully proclaimed Tuesday that $244 billion in U.S. liquefied natural gas projects are stalled because they “are struggling to find financiers and buyers” amid “pressure from cheap renewables”—i.e., rich green energy subsidies that Democrats want to make richer—and “tightening climate commitments.”

It should be mentioned that expectations play a role in such development. Unmentioned is the effect of putting more money into people’s pockets than there were goods to buy and the effect that has on prices.

Fair or not, politically motivated criticism or not, the facts remain that oil prices are higher than they were and Joe Biden is president. Presidents get blamed for what happens on their watches whether there’s anything they could have done about it or not.