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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Big Oil Is Finally Exercising Restraint, And Biden Is Pissed

  • Gasoline prices are rising to their highest levels in years, and Biden is facing increasing pressure to find a fall man.
  • Biden has already taken aim at OPEC+ and Russia, but now he’s looking in his own backyard.
  • This week, Biden asked federal regulators to open an investigation into the U.S. oil and gas industry to determine if it’s engaging in “illegal conduct”.

This week, the Najah’s Desert Oasis gas station in southeastern California put up a sign of the times. It read: $6.39 for regular. This remote gas pump isn’t your average fuelling station, to be sure, and even at the best of times, it has the highest gas prices in the country. But breaking the $6 mark is a monumental occasion, even for Najah’s. In California as a whole, the average gas prices are a painful and record-breaking $4.68 per gallon, and the nationwide average for a gallon of regular gasoline is now $3.41 -- a whopping $1.29 more than just a year ago. Indeed, inflation rates across the country are at a 31-year high, and Americans are really feeling the squeeze, and many are casting about who to blame for the hardship.

Although global demand for electricity has bounced back to pre-pandemic levels, global oil production has not -- not by a long shot. In the United States, oil production remains 12% lower than in February 2020, right before the impact of the pandemic ripped through oil markets. That’s the equivalent of pulling the U.S.’s entire production in the Gulf of Mexico out of the global economy. And oil and gas production levels have remained low even as the world suffers from an extreme energy crunch and skyrocketing fuel prices. 

And whose fault is it? Depending on who you ask, the answer is either Vladmir Putin and a geopolitical power play on the part of Russia, Joe Biden and his dastardly plan to do away with fossil fuels and suck U.S. coffers dry in the process, or OPEC+ and their stingy refusal to respond to the energy crisis unfolding in Europe, Asia, and (to a lesser extent) the United States. Now, President Joe Biden is pointing the finger at another culprit: the conniving and greedy domestic oil and gas industry. This week the U.S. president asked federal regulators to open an investigation into the U.S. oil and gas industry to determine whether companies are engaging in "illegal conduct" by profiting off of consumers’ pain, citing "mounting evidence of anti-consumer behavior by oil and gas companies."

"The bottom line is this: gasoline prices at the pump remain high, even though oil and gas companies' costs are declining," President Biden wrote this week in a letter to FTC chair Lina Khan. "The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump. I believe you should do so immediately." 

Indeed, the price of unfinished gasoline has declined more than 5% over the last month. Typically this decline would be reflected in prices at the pump, but instead, gas station sticker shock continues to intensify across the U.S. "This unexplained large gap between the price of unfinished gasoline and the average price of the pump is well-above the pre-pandemic average," Biden continued, adding that Big Oil is raking in "significant profits off higher energy prices."

Backing up President Biden’s claims, Bloomberg released a report this week that oil and gas explorers in the United States may point to politics as the reason that they are holding back on upping production to ease oil prices, but the real reason is much simpler: they are making money hand over fist. According to figures from Deloitte LLP, U.S. oil companies are making more money now than at any other point in the entire history of the nation’s shale revolution. “And this may just be the beginning,” Bloomberg Markets wrote. “Free cash flow, the key metric watched by investors, probably will increase by 38% next year, presuming oil prices remain elevated.”

The American Petroleum Institute has fired back at President Biden in the wake of his plea to the FTC, saying that the move is merely a “distraction from the fundamental shift that is taking place and the ill-advised government decisions that are exacerbating this challenging situation." A representative of API went on to criticize Biden’s allocation of his time and energy to fight with the domestic oil and gas industry and OPEC+, saying that his attentions would be better spent “encouraging the safe and responsible development of American-made oil and natural gas."

By Haley Zaremba for Oilprice.com

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Leave a comment
  • D, Land on November 21 2021 said:
    I traveled to my home state of Illinois last week and noticed the price at the pump was .58 cents a gallon higher than in Missouri. Will there be an investigation of the local "consumer pain" from those taxes.
  • Harold Blytt on November 24 2021 said:
    A crisis in oil & gas production began in 2014, when OPEC responded to increased O&G production in the US by opening the valves, deliberately lowering O&G prices. For the next seven years, average prices stayed sub-par. A lot of money was lost, a lot of capital destroyed. After seven years of consistent losses, investors are not going to rush in and spend billions on drilling and exploration. Get used to it Mr. Biden, you are in for a period of elevated O&G prices. And O&G investors who held on are finally going to recover their losses. There is a saying in commodities "Low prices are the cure for low prices." The translation in this case is that the prolonged spell of low O&G prices will predictably lead to a period of higher prices. Perhaps excessive to some, they will be quite satisfying to others.

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