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Biden today offered U.S. oil producers $70/barrel to refill the Strategic Petroleum Reserve. His aides reportedly offered OPEC $80 last month.
By Michael Shellenberger
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President Joe Biden today announced that he would buy oil from U.S. oil companies for $70 per barrel, significantly less than his aides reportedly offered OPEC+.
This afternoon President Joe Biden announced the sale of 15 million additional barrels of oil from America’s Strategic Petroleum Reserve (SPR) and his intention to release more oil this winter. “I have been doing everything in my power to reduce gas prices since Putin’s invasion of Ukraine caused these price hikes.”
But what he said is simply not true. Biden has leased less public land and off-shore waters than any president since World War II. He killed the re-opening of a major oil refinery in the U.S. Virgin Islands. And by releasing more oil from the SPR than any president in American history, Biden has repressed private sector investment in oil and gas production. After all, what’s the point in producing more oil and gas if the president of the United States, who has repeatedly promised to “end fossil fuel,” undercuts you in the market?
Biden’s policies are not the only reason for high gasoline prices. Refinery capacity in the U.S. has been declining for decades. Russia’s invasion of Ukraine led President Biden in March to ban Russian oil and natural gas imports into the U.S. And despite strenuous efforts by the Biden administration, OPEC+ oil-producing nations decided to cut oil production earlier this month.
But President Biden’s policies are the leading cause of the lack of supply and resulting high prices of oil and gasoline. The U.S. produces more oil in a single day than what it imported from Russia in February. Part of the reason OPEC+ cut production was Biden’s constant SPR releases. And Biden and his party had been blocking the expansion of oil refinery capacity for nearly two decades.
Moreover, Biden said he would buy oil from American producers to refill the SPR only when the price drops to $70 per barrel or lower. But last month, Biden’s aides quietly offered to buy OPEC+ oil at $80 per barrel. And, over the last year, the Biden administration has pleaded with Saudi Arabia to produce more oil and lifted some sanctions on Venezuela.
Meanwhile, when asked if Biden had met, or considered meeting with, oil and gas executives, White House Press Secretary Karine Jean-Pierre confirmed he had not. “The Department of Energy has had several meetings with oil companies about what we can do to lower prices,” said Jean-Pierre. “And some White House officials have attended those meetings as well.” And Biden again today attacked American oil companies.
Why is that? Why is Biden’s wrath disproportionately focused inward?
Part of the reason is political expediency: people don’t like oil companies. And so Biden accuses the oil and gas companies of profiting, unethically and illegally, from tight supplies. “My message to the oil companies is this,” said Biden, “you’re sitting on record profits… I’m calling on oil companies to pass the savings on to consumers.”
Biden clearly has ulterior motivates. After all, he has never made a similar plea to America’s technology companies, Meta (Facebook), Apple, and Google. Last year, their earnings were $39 billion, $30 billion, and $76 billion, respectively, compared to $23 billion, $21 billion, and $16 billion for Exxon, Shell, and Chevron, respectively.
Biden hinted that oil companies were conspiring to fix prices. “When the cost of oil comes down, we should see the price of the gas station at the pump come down as well. That’s how it’s supposed to work. But that’s not what’s happening.”
But there is no evidence of illegal price setting and abundant proof that lack of oil refinery capacity is behind the high gasoline prices. Last week, a federal judge issued a 103-page ruling dismissing a class-action lawsuit that claimed traders at oil companies had conspired to keep costs high.
Moreover, if oil and gas companies were able to control prices, then they would have prevented prices from crashing in 2020 after the lockdowns in response to the covid pandemic, or during the last decade when many oil and gas companies went bankrupt in response to low prices resulting from over-supply thanks to the fracking revolution.
From 2010 to 2020, U.S. shale frackers lost $300 billion. From mid-2012 to mid-2017, the 60 largest fracking companies lost an average of $9 billion every quarter. From 2006 to 2014, they lost $80 billion. Even when oil was $100 a barrel, in 2014, they lost $20 billion.
In 2008, when Biden was in the Senate, he and other Democrats killed legislation to expand oil production and refinery capacity. After Republicans tried to expand refinery capacity, the Senate Democratic majority leader said, “They have more capacity that they’re holding back, so that they can keep their product dear and limited and short, and so that the consumers will ultimately pay more.”
America’s oil and gas producers reacted negatively to President Biden’s announcement. “We don’t need another government program or additional guarantees from the federal government,” said Anne Bradbury of AXPC, a trade association representing U.S. oil and gas producers. “We need the administration to work collaboratively to remove the barriers that exist to ramping up production—many of which have been imposed by this administration, including restricting access on federal lands, slowing permitting, blocking pipelines, and price gouging investigations.”
It’s obvious that Democrats are pursuing a long-term strategy to shut down the U.S. oil and gas industry. That strategy has led the White House to engage in the tricky, if not impossible, task of trying to control the price of oil in the U.S. and globally. In addition to its pleadings and offers to OPEC+, the White House is pursuing a price cap on Russian oil, which even sympathetic journalists say could backfire, since Russia could circumvent efforts to control its oil price by selling oil to China, India, and other developing nations.
As such, Biden’s strategy poses real risks for Democrats, which Biden and his aides recognize, and which likely led them to hold today’s news conference. Democrats, in the spring of 2020, killed a proposal by President Donald Trump to replenish the SPR with oil from American producers, not OPEC+ ones, and for $24 a barrel, not the $80 a barrel that the Biden White House promised to OPEC+. When asked about it today, Jean-Pierre waved it away as something from “a different time.”
But Senate Democrats defeated the proposal and later bragged that their party had blocked a “bailout for big oil.” Today, Democrats are still condemning big oil. But they are also asking for nearly three times, $70 a barrel, than what Biden aides reportedly provided the Saudis and OPEC+. As such, the moment is coming soon where when Biden says,. “I have been doing everything in my power to reduce gas prices,” voters and others will have the knowledge and anger to say, “No, you’re not.”
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