By Noah Rothman
Tuesday, November 23, 2021
Now that it’s acutely aware of the political costs
associated with inflation, the Biden administration is finally taking action.
“How about some immediate help with gas prices?” White House Chief of
Staff Ron Klain asked in a November 17 tweet. He answered
his own question by linking to a CNN article advertising a forthcoming
coordinated release of strategic petroleum reserves by the United States and
other major energy consumers abroad. The article’s headline advised readers who are enthused by
the declining price of petroleum products in futures markets to “thank China
and Joe Biden.”
This episode illustrates the general absurdity of the
Democratic Party’s energy policy, to the extent that it has one. The White
House is hostile toward fossil fuels—indeed, per White House Press Sec. Jen Psaki, “the rise in gas prices over the
long-term makes an even stronger case for doubling down our investment and
focus on [a] clean energy option.” But the administration also seems to believe
that energy should be as cheap and abundant as possible. Biden officials don’t
want to encourage the exploration and exploitation of domestic natural-gas
deposits or crude wells, but they also want foreign producers like OPEC to increase
supply. They believe that major polluters such as China should limit their use
of hydrocarbons but, apparently, not if those limitations contribute to rising
consumer costs.
This is incoherent.
The administration’s decision to release 50 million barrels
from the Strategic Petroleum Reserve into a nation that consumes roughly 20
million barrels per day isn’t an energy policy. It’s a publicity stunt. It
comes on the heels of a truly shameless effort on the Biden administration to
intimidate oil and gas companies into reducing energy prices by referring them to the Federal Trade Commission for
potential “illegal conduct,” e.g. gouging Americans at the pump. This display
of manic gesticulations won’t ease the financial burdens on Americans. Indeed,
it showcases how little appetite there is in the White House for genuine
solutions to the present energy crunch.
“We’re focused on the economic boom,” White House economic
adviser Jared Bernstein told reporters in June. By then, Biden
had already signed a nearly $2 trillion Covid relief bill into law, piling more
stimulus atop the $4 trillion in emergency spending that Congress
approved in 2020. The administration’s primary objective at the time was to
secure yet another $4 trillion spending bill, this time focused on
“infrastructure” spending.
Although Bernstein insisted that the administration’s
members weren’t “sitting on our hands” when it came to the threat posed by
inflation, their proposals for curing this “transitory” phenomenon involved
more government spending to keep consumer demand high. In other words, more of
the same. It somehow came as a shock when Washington’s efforts to subsidize
consumer demand created more consumer demand—a phenomenon augmented by the
easing of the pandemic’s artificial limits on Americans’ spending habits.
In the fall, consumer prices continued to rise well above expectations, and goods shortages resulting from
the pressures of the pandemic on the supply chain only contributed to that
condition. Energy is a consumer good like any other, albeit one that lacks the
elasticity of other consumer goods that you don’t need to get to work or stave
off hypothermia. A comprehensive energy policy that actively responds to these
adverse conditions might involve the release of some strategic reserves, but
only in concert with policies designed to bring more domestic energy to market.
The Biden administration has forsaken the second half of that strategy to
satisfy the Democratic Party’s environmental activists.
On the eve of the pandemic, in late 2019, the United
States was producing a record 13 million barrels of crude oil and 93 billion
cubic feet of natural gas per day. Demand for energy cratered with the arrival
of COVID. Subsidizing Americans’ lifestyles and the industries they patronized
amid that temporary crisis was, indeed, a worthy priority. But Joe Biden didn’t
enter office determined to restore the status quo. He came to overturn it. So
for the first several months of his administration, the president put
the screws to energy producers.
Biden shut down oil and gas leasing on federal land. He
directed executive agencies to eliminate spending that in any way served to
subsidize fossil-fuel producers. He forced developers to abandon critical
transit networks such as the Keystone XL pipeline. All of this has contributed
to the skittishness of the investor class, which was paring back expensive and
risky investments in new wells even before the onset of the pandemic. This,
along with high energy demand abroad, the reluctance of foreign producers to
ramp up production, and increased costs of operations associated with
clean-energy mandates, has exacerbated the supply crunch. “All of those
different moving pieces took U.S. energy production down by about 2 million
barrels a day over the course of the last year, at a time when demand has
surged based on the global reopening trade,” one market strategist told Axios reporters in October.
Taken together, this means real pain—pain for American
consumers, pain for Americans in the energy sector, and political pain for the
White House. And yet, the administration hasn’t curbed its addiction to quick
fixes and clever messaging strategies. Rather than address the conditions
contributing to the rising cost of consumer prices by closing off the spigot in
Washington, Joe Biden’s White House is looking to change the subject again. The
voting public doesn’t seem inclined to let them get away with it.
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