Some politicians wear their economic illiteracy as a badge of honor. But President Biden’s economic illiteracy, together with his demagoguery about greedy oil companies, stands to make the nation’s economic situation far worse.
When Biden took office in January 2021, the average U.S. price for a gallon of gasoline was $2.25 per gallon. According to the Energy Information Administration, the average U.S. price this week is just over $5 per gallon, or 120 percent higher.
As prices have risen, the administration has changed its strategy. First, it ignored inflation, dismissing it as a temporary blip. As prices kept going up, Biden ordered releases from the Strategic Petroleum Reserve, claiming that the move would ease inflation at the pump. Then he implored Saudi Arabia to boost production, while the Department of the Interior continued to slow-walk new oil and gas leases on federal lands and cancelled all new leases in the Gulf of Mexico.
Now Biden is threatening oil companies. In a recent speech, he claimed that Exxon-Mobil “made more money than God this year.” In a series of letters to oil CEOS, the president claims that the companies can immediately increase output from their refineries, seemingly implying that they are deliberately restricting output. “Your companies and others have an opportunity to take immediate actions to increase the supply of gasoline, diesel and other refined product you are producing,” Biden wrote. He has tried this approach before, asking the Federal Trade Commission to investigate collusion and price-gouging by retail gasoline stations. The FTC has found no such evidence.
It’s not clear what U.S. refinery operators are supposed to do. They are operating at 94 percent capacity, and that’s expected to increase to about 95 percent later this summer. Total capacity has declined, as older refineries, some almost 100 years old, have closed because they were no longer profitable to operate, with losses worsened by the administration’s renewable-fuels standards, which require costly modifications. Last year, five refineries were shut down, reducing total capacity by about 1 million barrels per day. Shuttered refineries cannot be restarted on a whim. With a president who demonized hydrocarbons while campaigning and cancelled the Keystone Pipeline on his first day in office, it’s not surprising that oil companies show little interest in investing in new refinery capacity.
In his letters to CEOs, Biden pledged to intervene if he doesn’t see results. “My administration is prepared to use all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term, and to ensure that every region of this country is appropriately supplied.” It’s not clear what emergency powers he would use. The Defense Production Act, which the president recently invoked to increase supplies of baby formula, won’t make new refineries magically appear or open ones that have closed. And the administration’s latest idea—to hand out gasoline “rebate” cards to consumers—would swell the deficit even further, assuming the administration could overcome the microchip shortage to supply such cards.
Biden isn’t alone in making ill-considered economic judgments. Oregon senator Ron Wyden wants to impose a surtax on oil companies, doubling their income-tax rate from the current 21 percent to 42 percent, to end “price gouging.” Energy secretary Jennifer Granholm says that this idea is under consideration. No clear definition exists of “price gouging,” and imposing a surtax on oil-company profits will reduce crude-oil and refined-products supplies, which will drive up prices even further.
The administration’s continued denunciation of the supposed greed of oil companies, grocery stores, meat packers, pharmaceutical companies, and every other business may be good politics—at least for some Democrats—but it is taking a toll on the American economy.
There’s a simple solution: stop the soapboxing and embrace policies that work, like emissions-free nuclear power. Reduce the bureaucratic morass that hamstrings refinery operations. Eliminate the renewable-fuels standard, including ethanol mandates that drive up the cost of food. Ask TransCanada to resume constructing the Keystone XL Pipeline. Stop listening to the Al Gores of the world, whose claims have often proven baseless. It’s taken time to get us to this point, and it will take time to fix the damage.
President Biden is free to ignore economic principles, but economic principles will not ignore him—or Americans, who are taking the hit from these failed policies every day.
Photo by FREDERIC J. BROWN/AFP via Getty Images