America’s self-inflicted energy apocalypse
To many people outside of the United States, the behavior of President Joe Biden toward Saudi Arabia and other oil-producing nations seems bizarre. As a presidential candidate, he threatened to treat Saudi Arabia as a “pariah.” Then, as president, Biden and his aides have urged Saudi Arabia and other OPEC members to produce more oil. But he did so in a highly insulting way, refusing to shake hands with Saudi Arabia’s Crown Prince Mohammed Bin Salman, when Biden visited in August, and allowing his aides to roughly demand that Saudi Arabia pump more oil, simply because Biden wanted it to, in order to lower gasoline prices in advance of the elections next month, without any consideration of the interests of Saudi Arabia and other oil exporting nations.
Unsurprisingly, Biden’s heavy-handed efforts have backfired. “In August,” the Wall Street Journal reported last week, “the Saudis had planned to push OPEC+ to raise oil production by 500,000 barrels per day, but [Crown] Prince Mohammed ordered the increase lowered to a token 100,000 barrels a day after the Biden visit.” Angered, Biden’s energy-security envoy, Amos Hochstein, emailed the Saudi energy minister accusing him of breaking his word. The email upset the minister, who shortly thereafter rallied other OPEC+ nations to cut oil production for the first time since the pandemic began, which they did on October 5.
To some extent what has occurred is the result of incompetence and arrogance. The US has for 80 years made demands on Saudi Arabia and expected them to be met. But Biden’s threat to make Saudi Arabia a “pariah” angered and threatened the nation, as did arrogant demands to increase production. Part of the blame properly belongs to Biden, who has lost the subtlety and deftness he once had as a politician. He is now angrier, less patient, and gruffer, as powerful 79-year-old men can often be.
Yet the underlying problem is not personalities but policy. The Biden administration is beholden to apocalyptic climate activists, radical environmentalists, and green billionaire donors in the Democratic Party, who have successfully prevented Biden from expanding oil production in the US. It would have been easy for Biden to make up for the loss of Russian oil imports through expanded domestic drilling. Where the US had imported around 18 million barrels of Russian oil per month, we produce 19 million barrels of oil domestically per day. Instead, Biden has leased less public land for oil and gas production during his first 19 months in office than any other administration since World War II, according to a Wall Street Journal analysis.
It is certainly possible for the US to pursue a sane energy policy while turning away from oil by expanding the role of nuclear power and natural gas. Yet nothing could be less appealing to the self-styled environmentalist progressives who are determining the Biden Administration’s energy policies.
Why are nuclear power and natural gas undesirable? Because those two technologies would make unnecessary the radical social transformation that renewable energy advocates desire. Nuclear power and natural gas are straightforward plug-and-play technical fixes that make energy cheaper, not more expensive. With renewables, progressives can demand control over when you use electricity. They can justify expensive make-work programs to manage the high cost of unreliability. And renewables make energy more expensive, and scarce, as thus reduce economic growth, which radical environmentalists wrong believe to be the “root cause” of environmental destruction.
While progressives play on public fears of nuclear wastes and meltdowns, the relative safety records of the different plausible energy choices America might make are clear. Only nuclear waste is safely managed; solar panels are full of toxic metals that go into landfills or are shipped to Africa. Nuclear is the safest way to make electricity for all the electric cars that will shortly be mandated in California and other states. As for natural gas, it reduced emissions 22 percent between 2005 and 2020.
Renewables can’t power modern civilization. Progressives know this. That’s why they favor them while, at the same time, they drive up gas prices by shutting down production. In May, President Joe Biden’s EPA shut down a large oil refinery in the US Virgin Islands that investors had wanted to upgrade to reduce pollution. Biden has leased less federal land and offshore areas than any president since World War II. And he and his cabinet officials have repeatedly said their goal is to “end fossil fuel.”
At the same time, Biden, his cabinet, and his spokespersons have turned around and blamed gas station owners, refineries, and oil producers, for high gasoline prices. In June, Biden accused oil refiners of price gouging even though they were operating at 94 percent of their capacity. And he said, “This idea that [the oil and gas firms] don’t have oil to drill and to bring up is simply not true.” But it was true.
This tactic of bald-faced official lying and scapegoating in defense of unworkable energy policies has been going on for decades. In 2006, Congressional Democrats killed federal legislation to increase refinery capacity and then turned around and blamed the industry for restricting supplies. “They thrive in an environment where markets are tight,” said Rep. Ed Markey (D-MA), who is today a Senator.
The same year, Senate Democrats killed legislation to expand oil production. “We need lower gas prices and energy independence,” said the late Senator Harry Reid. “Republican leaders have proposed the same old solution: drill, drill, drill. But drill, drill, drill is not going to deliver the results we need.” In fact, it was drill, drill, drill (and frack, frack, frack) that resulted in the US becoming the world’s largest oil producer in 2018.
The US oil and gas industry eagerly expanded production between 2010 and 2020 by fracking so much shale that many of them went bankrupt because prices were so low for so long. And the oil and gas industry has long sought to expand refinery production and been thwarted by opposition at the local, state, and federal levels.
Republicans tried again to expand refinery capacity in 2008, only to face the now-familiar argument from Democrats that oil companies were manipulating supply to keep prices high. “It’s been more than 30 years since America built its last new refinery,” said then-President George W. Bush. Responded Senator Dick Durbin (D-IL). “Don’t buy this argument that it’s about refineries. 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.”
In the spring of 2020, Democrats killed a proposal by President Donald Trump to replenish the SPR with oil from American producers – not OPEC+ – at a price of $24 a barrel. In September, the Biden White House promised OPEC+ a whopping $80 a barrel.
At the time, Trump was seeking to stabilize the American oil industry after the COVID-19 pandemic massively reduced oil demand. Trump and Congressional Republicans proposed spending $3 billion to fill the SPR. Senate Democratic Leader Chuck Schumer successfully defeated the proposal, and later bragged that his party had blocked a “bailout for big oil.”
Even boosters of the Biden White House viewed the Democrats’ opposition to refilling the SPR as a major blunder. “That decision,” noted Bloomberg, “effectively cost the US billions in potential profits and meant Biden had tens of millions of fewer barrels at his disposal with which to counter price surges.” Moreover, observed Bloomberg, it will take significantly more oil today to fill the SPR than it would have two years ago. In spring 2020, the SPR contained 634 million barrels out of a capacity of 727 million. Now, the reserve is below 442 million barrels, its lowest level in 38 years. The decision looks even worse considering the decision by OPEC+ to cut production.
Sanity seems unlikely to prevail anytime soon. Biden doesn’t want to anger his environmentalist base of voters and donors, who oppose expanded domestic oil production, but accept that increasing OPEC+ production in the short term may be a political necessity. Biden and the Democrats are pursuing a long-term strategy to shut down the US oil and gas industry, which they demonize as an apocalyptic threat to the planet. The cold political calculation behind such language is that the US oil and gas industry is a red state business that is friendlier to Republicans than to Democrats. Destroying the US oil and gas business may or may not save the planet — but it will certainly help Democrats and hurt Republicans.
That strategy has led the White House to engage in the tricky if not impossible task of trying to control the price of oil, not just in the US but also globally. In addition to its pleadings and offers to OPEC+, the Europe Union has just approved a price cap on Russian oil that had been pushed by the Biden administration, but which most experts believe won’t work since Russia could sell its oil to China, India, and other developing nations, who have already said they won’t cooperate with the price cap.
In the end, it’s clear that Biden’s efforts are backfiring both economically and politically. He looks amoral, having gone from calling Saudi Arabia a “pariah” to urging a court to give the Saudi Crown Prince sovereign immunity. And Biden looks weak, unable to influence OPEC+ in the way past American presidents could.
The problem for Biden and Democrats is that there is no obvious fix. Their base of voters and their millionaire and billionaire donors have been educated to believe that climate change threatens imminent global apocalypse unless we stop using oil and gas immediately and switch to solar panels, wind turbines, and electric cars. As such, they face a deeply structural problem.
Over time, Democrats will need to learn that they can have cheap energy or expensive energy, just as they can produce more oil at home or be more dependent upon oil abroad. Until then, and increasingly as energy prices rise in the US, the Democrats will cede the moral high ground to their political opponents who are demanding a significant expansion of oil and gas production. If Biden isn’t careful, it won’t be the Saudis who are perceived as a “pariah,” but rather the Democratic Party.
