In a February 22 White House speech responding to Russia’s initial incursion into Eastern Ukraine, President Joe Biden assured the U.S. public that, "As we respond, my administration is using every tool at our disposal to protect [Americans] from rising prices at the pump." But, the President didn’t detail exactly what any of those “tools” might be. That’s probably because he has precious few such tools at his disposal.
Biden’s assurance echoed his promise made earlier in February to “work like the devil” to bring down high gas prices at the pump. Of course, he said that as part of an answer in which he also admitted, “I don’t know why they keep moving and all that.” Thus, the President promises to work hard to fix the problem, but admits to having little understanding of its causes.
Unfortunately, secretaries of Energy and the Interior Department Jennifer Granholm and Deb Haaland have not made any serious proposals that could result in lower crude prices or higher domestic production either. Instead, Energy Secretary Granholm laughed when asked about the Biden Administration’s plan to increase oil production in the U.S.
In the meantime, many energy industry executives have lost faith in the Biden Administration’s energy agenda. At a recent industry conference, the CEO of one large upstream company referred to the Biden administration as being “energy ignorant.” Another CEO admitted that their company has “no relationship at all” with anyone in the administration. Another told me during a recent interview that they found it “impossible” to even get a meeting with relevant officials at the Department of Interior or DOE. How can any government official really understand an industry they refuse to have a conversation with?
The decision by Russian President Vladimir Putin Thursday to launch a full-scale invasion of Ukraine complicates matters even further. Markets panicked at the news, causing crude prices to jump 8% over night, with the international Brent price topping $105 per barrel and the U.S. domestic West Texas Intermediate index hitting the $100 mark.
Biden and Granholm have spent the better part of a year promising to do everything at their disposal to slow the rise of oil and gasoline prices, efforts that have generally boiled down to their urging the OPEC+ nations to produce more oil. The net result has been an inexorable rise in energy costs. That $100 WTI price is up by 145% from Biden’s election day. AAA reports that the average price for a gallon of regular gasoline stood at an 8-year high of $3.54 Thursday morning, up by over 40% from 12 months ago. If the President has been working like the devil to address energy prices, whatever he’s been doing isn’t helping. If he has any new ideas, he didn’t opt to mention them in Tuesday’s speech.
The situation between Russia and Ukraine hasn’t helped, of course, but crude prices, and prices at the pump were already rising before the escalation of tensions in Ukraine.
President Biden is left with few options to materially lower crude prices in the short term. He already tried to use one of the few “tools” he has to possibly influence rising prices with the release of 50 million barrels of oil from the U.S. Strategic Petroleum Reserve he announced last November.
During an appearance on CNN Newsroom on Feb. 9, White House Council of Economic Advisors member Jared Bernstein claimed without evidence that the President’s November order to sell 50 million barrels from it resulted in “the price of gasoline actually fell by ten cents a gallon.” In reality, crude prices rose on November 23, the day Biden announced his order. They only started falling on November 25, when news of the Omicron COVID variant hit the global media, stoking market fears of falling oil demand. But those fears had dissipated by mid-December, after which oil and gasoline prices resumed their inexorable rise.
Bernstein also noted that “oil-consuming countries also have their own strategic reserves,” a nod to the fact that India released a small volume from its reserve late last year, and that China had promised in mid-January to release volumes from its reserve as well. But China’s release has not been forthcoming, despite the fact that the Xi government stated in January that it would begin with the advent of the Lunar New Year on February 1. Biden’s economic advisor then suggested that the President could order another release from the U.S. SPR, a doubling down on November’s failed tactic. It failed once, so let’s try it again, he seemed to be saying.
The reality is that no American president really has many ways to try to influence oil prices or gasoline prices at the pump. What few tools they do have – like approving domestic pipelines and providing regulatory relief for the U.S. oil and gas industry – are tools the Biden Administration is ideologically opposed to implementing.
With oil prices now topping $100 per barrel due to underinvestment, shrinking spare production capacity, OPEC+ underproduction and rising geopolitical risk, Biden is stuck in an uncomfortable position. While the President does not deserve the full blame for higher crude prices, the truth is that this administration has done little to encourage domestic production, and therefore is part of the problem, not the solution.
By David Blackmon for Oilprice.com
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