The Biden administration can’t seem to decide how to respond to the approximately 50 percent increase in retail gasoline prices since October 2020 and the economic damage it has caused, including accelerated inflation.
First, it denied gas prices were increasing, blaming changes on seasonal demand rather than diminished supplies, but that explanation didn’t survive scrutiny. Next, the president begged OPEC to increase crude oil production; not surprisingly, OPEC responded with the diplomatic equivalent of a raised middle finger. Earlier this week, the administration trotted out the tired canard that the big oil companies have conspired to raise gasoline prices, calling for the Federal Trade Commission to investigate. Though this has been a go-to strategy for presidents for 40 years, such conspiracies have never been demonstrated. Big Oil doesn’t even own most retail gasoline stations and doesn’t control retail prices.
The administration has also embraced contradictory “it’s good for you” and “it’s your fault” responses to rising gas prices. A high price at the pump, it says, is just another reason to buy more electric vehicles and build more EV charging stations. And if higher prices are causing economic harm, well, U.S. consumers can afford it—and they shouldn’t be buying so much stuff, anyway.
The one response the administration hasn’t tried yet is to enact policies that would lower prices. In the short term, it could offer incentives for financially weakened U.S. extraction companies to reopen wells and restart production. In the long term, it could reverse the cancellation of the Keystone XL pipeline permit and apologize to TransCanada, which is suing the U.S. for $11 billion in damages. As my colleague Mark Mills discussed with Alberta premier Jason Kenney earlier this year, the pipeline would have brought crude oil supplies from Alberta to the American Midwest. Even most environmentalists admit that canceling Keystone will not reduce pollution and greenhouse-gas emissions. Instead of being refined in the Midwest, most of that crude oil will be shipped overseas, and the remainder will be transported by truck into the U.S., raising the risk of oil spills (pipelines are far safer than trucks). And building the pipeline would have created thousands of high-paying jobs.
Biden could also end the de facto ban on new oil and gas-drilling permits on federal lands. Though the “temporary” moratorium on new leases expired last spring, the Bureau of Land Management has been slow-walking new permit applications. Most recently, the administration placed 20,000 acres of federal lands surrounding the Chaco Canyon National Monument in northwest New Mexico off-limits to any drilling activity for the next 20 years by imposing a ten-mile buffer zone around the monument. The administration touted this as a victory for Native Americans, but the Navajo Nation, many of whose people own land in the area, wants a smaller buffer zone because of the adverse economic impacts the larger one will have.
In November 2019, U.S crude oil production peaked at just under 13 million barrels per day (BPD), almost 50 percent higher than when President Trump took office. The U.S. became a net exporter of crude oil—thus achieving the long-desired goal of “energy independence.” But by May 2020, production had dropped by more than 25 percent, to just 9.7 million BPD. Today, production has reached 11 million BPD, even as crude oil prices have increased. Natural gas followed a similar pattern: domestic production increased almost 40 percent between March 2017, soon after Trump took office, and January 2020.
Instead of pursuing a green energy policy that will achieve nothing but skyrocketing electricity prices and more inflation, Biden might want to consider taking steps that will benefit the American people, such as increasing domestic energy production. Who knows? It might even pay political dividends for Democrats next year.
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