U.S. Energy Secretary Jennifer Granholm met Thursday with executives from the big oil companies over high gas prices. Afterward, her office said she challenged the executives to “deliver solutions to ensure (a) secure, affordable supply” of fuel.
Oil executives are not foolish. They played it straight by issuing a generic statement about working with policy makers for energy security. However, it would be refreshing if one of them had decided to give the administration a short course on economics and a brief history lesson.
The economics are basic stuff: the economy came surging out of the pandemic and now global demand is greater than supply. Additionally, the sanctions on Russian oil exports have put additional strain on the availability of petroleum.
Not that long ago, supply dramatically outstripped demand. The pandemic triggered a national emergency declaration in March 2020 and a few weeks after that, the average price for a gallon of gas plummeted to $1.77 per gallon. Oil prices collapsed to below $20 a barrel.
I get that nobody feels sorry for the oil companies, but their business was off during the pandemic just like every other business. Then came the 2020 election, and this is where the recent history comes in.
Joe Biden campaigned on plans to transition away from fossil fuels and toward renewables. His cancelation of the Keystone XL Pipeline the first day in office sent a powerful message as to what his energy policy would be.
“The United States and the world face a climate crisis,” Biden said. “That crisis must be met with action on a scale and at a speed commensurate with the need to avoid setting the world on a dangerous, potentially catastrophic, climate trajectory.”
The Wall Street Journal described the administration’s energy policy as “a jumble of incoherence.” The inconsistency adds even more unpredictability to the market, which makes it even more difficult for oil companies to plan for future drilling, production and refining.
Speaking of refining, that part of the energy supply chain is already running at capacity. It is not as though processors can turn a few knobs and produce more gasoline, especially when there are already state and federal regulations requiring multiple fuel blends during the summer.
President Biden ordered the release of more oil from the strategic reserve and that changed nothing. Now he is proposing a three-month suspension of the 18.4 cent per gallon federal gas tax. That has fallen flat, even among some members of his own party. These two measures are tantamount to giving an aspirin to a cancer patient.
Now the President must go to Saudi Arabia, hat in hand, where he will attempt to coax Crown Prince Mohammed bin Salman, who Biden once pledged to make a “pariah,” to open the oil spigot more. Let’s see how that conversation goes.
Meanwhile, back home Biden is busy shaming oil companies for making a profit, all the while questioning why they won’t produce more oil, even though the administration has a stated goal of putting the fossil fuel industry out of business.