Millions of American consumers, already struggling with the highest inflation rates in over 30 years, will be hitting the road this Thanksgiving weekend and paying the highest gasoline prices since 2012. They might well ponder on Lewis Carrol’s fantastical novel “Through the Looking Glass”, when Alice keeps running but remains in the same spot and she tells the Red Queen “Well, in our country you’d generally get to somewhere else—if you run very fast for a long time, as we’ve been doing.” “A slow sort of country!” says the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Raiding the US Oil Stockpile
In President Biden’s America, it seems, oil policy keeps morphing as fast as it can, but with scant achievement. Indeed, it has proved regressive for the country. Energy analysts tracking US oil policy since President Biden’s inauguration find themselves deeper and deeper into the absurdities of Alice’s Wonderland. The latest in President Biden’s approach to soaring fuel prices is to release crude oil from its strategic crude oil reserves. This marks the first time in decades that a sitting US president has resorted to releasing its emergency oil stockpile to handle market-determined rising fuel prices. The stockpile, to remind the reader, was set up in concert with other members of the International Energy Agency as a national security instrument to meet unexpected supply shocks from wars (such as Libya in 2011) and extreme weather events (Hurricane Katrina in 2005).
Biden’s announcement on Tuesday that the United States will release 50 million barrels of oil from the U.S. Strategic Petroleum Reserve to try to tame fuel prices was in coordination with small stockpile releases from China, India, South Korea, Japan and Britain. China’s Foreign Ministry spokesperson, it should be noted, said the country will arrange a release of oil from Strategic Petroleum Reserve (SPR) according to its own actual needs, declining to comment if it would be releasing crude in the coordinated effort led by the United States. Goldman Sachs GS -1.8% called the US-led “coordinated release” of crude oil which may amount to some 70 to 80 million barrels a “drop in the ocean” for a global market that is running at about 100 million barrels per day. Hours after the announcement the international bellwether Brent crude oil prices rose by over $2.00 a barrel, since the market had expected a more substantive release when it was first mooted by the Biden administration.
The Biden administration’s SPR release follows its repeated high profile requests for increased production from the OPEC+ group. Back in August, US national security adviser Jake Sullivan had criticized big oil producers in OPEC+ which include Saudi Arabia and Russia for what he said were “insufficient crude (oil) production levels”. “At a critical moment in the global recovery, this is simply not enough.” In a TV interview on November 6th, US Energy Secretary Jennifer Granholm responded to a question on what could be done about the US gasoline price increases by stating that “Oil is a global market. It is controlled by a cartel. That cartel is called OPEC, and they made a decision yesterday that they were not going to increase beyond what they were already planning.” The sheer effrontery of castigating the OPEC+ oil producers group’s for not increasing its planned output schedule while the Biden administration is doing its best to hobble domestic oil and gas production in its climate change crusade did not seem to concern the Energy Secretary.
In early November, President Biden said “I do think that the idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not, is not, right.” This is after Biden called Saudi Arabia a “pariah” state when he was on the campaign trail. Adding further insult after having won the Presidency, Biden refused to communicate with the de facto ruler Crown Prince Mohammed bin Salman, insisting that he would only be speaking to the frail and aging King Salman as his appropriate “counterpart”. Unsurprisingly, Crown Prince Salman, kingpin of OPEC policy, is more concerned with global oil supply and demand fundamentals than the political needs of a flailing US President worried about high gasoline prices and sinking popularity polls. The OPEC+ group, wary of overshooting scheduled oil supply increases and risking an oil price crash when the resurgence of covid cases in Europe and China threatens to mute global oil demand growth, has repeatedly ignored Biden’s requests.
…And US Oil And Gas Producers
Having blamed OPEC+ for high US fuel prices, the Biden administration turned next to another familiar whipping boy: the US oil and gas producers. Last week, President Biden wrote to the Federal Trade Commission to probe possible illegal conduct in US gasoline markets, citing “mounting evidence of anti-consumer behaviour by oil and gas companies”. White House Press Secretary Jen Psaki asserted at a press briefing that “we will continue to press oil companies who have made record profits and are overseeing what we consider to be price gouging out there.” Calling Biden’s demand for an FTC investigation a “distraction”, the American Petroleum Institute retorted “Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply, we should be encouraging the safe and responsible development of American-made oil and natural gas.”
In what must surely be the highlight of our tour of Biden’s Energy Wonderland, the President offered these words of wisdom: “For the hundreds of thousands of folks who bought one of those electric cars, they’re going to save $800 to $1000 in fuel costs this year,” referring to the $112,595 electric Hummer pickup he test drove at a General Motors GM -1.4% factory in Detroit earlier this month. It did not seem to occur to President Biden that the average American households struggling to put a turkey dinner on the table or gas in their tank this Thanksgiving weekend might not have $100,000 to spare.
Further Down Alice’s Rabbit Hole
Since its inception, the Biden administration has done just about everything to wage war on US oil and gas. President Biden signed an Executive Order in his second day in office to “protect public health and the environment and restoring science to tackle the climate crisis”, cancelling the $7 billion Keystone XL pipeline. A series of executive orders prioritized “fighting climate change” across all levels of government, halted all new oil and natural gas leases on public lands and waters, and began an obstructive review of existing permits for fossil fuel development. Blaming OPEC+ and US oil and gas producers in rapid succession and then following up with an ill-considered release of oil from its stockpile to handle self-inflicted fuel price increases mark this administration’s disastrous management of energy affairs.
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For the hapless American consumer, running fast enough to keep ahead of the US energy policy not only not keeps him in the same spot, as Alice found out in her adventures, but may well push him further down the rabbit hole.
I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past 25 years. I focus on global energy developments from the perspective of Asian countries that remain large markets for oil, gas and coal. I have written extensively on the areas of economic development, environment and energy economics. My publications include “Singapore in a Post-Kyoto World: Energy, Environment and the Economy” published by the Institute of Southeast Asian Studies (2015). I won the 1984 Robert S. McNamara Research Fellow award of the World Bank and received my Ph.D. in Economics in 1992.