Manhattan Contrarian By Francis Menton | November 27, 2021
Is President Biden doing anything right? To this observer, his policies range from at best merely incompetent, to at worst malicious hatred of the country and people whose interests he was elected to advance. Somewhere in between those two extremes we have Biden’s energy policy. In this arena, appropriate adjectives would be inconsistent, incoherent, and destructive. Don’t even attempt to make sense of it. To summarize in one word, it is complete madness.
I’m old enough to remember the 1970s, and the two “oil shocks” that occurred during that decade. A brief summary of the history can be found in this 2012 piece from Foreign Policy. By 1970/71, U.S. oil production had peaked and begun to decline. 1973 brought the Yom Kippur War in the Middle East, and OPEC halted oil shipments to the U.S., Western Europe and Japan. By January 1974, crude oil prices on the world markets had “more than quadrupled” (from around $3 to $12 per barrel). Further constraints on supply in the late 70s, most notably a big drop in supply from Iran following the ouster of the Shah, were followed by a further tripling of the price, this time from about $12 to about $36 per barrel. Government efforts at price controls were largely unsuccessful at restraining prices at the pump, but did cause shortages and lines at gas stations that maddened consumers. Without adequate domestic oil supply, the U.S. became a supplicant to the big international exporters, mainly OPEC and Russia. As reported in that Foreign Policy piece, President Carter reacted by “mak[ing] energy independence the central ambition of his presidency.”
Energy independence was a bi-partisan goal of American Presidents and of the Congress, until President Obama came along. Obama had the opposite strategy. He had drunk the climate Kool-Aid, and thought that the right goals were to restrict the production of fossil fuel energy, which would cause prices to rise and thereby restrict consumption. The famous quote from Obama, uttered in 2008 during his first presidential campaign, was “under my plan of a cap-and-trade system, electricity prices would necessarily skyrocket.” Although that statement specifically dealt with electricity prices, the same principle would apply as well to all energy prices. And Obama sought to put his strategy into practice, both by putting proposed “cap-and-trade” legislation before Congress, and by attempting to use his executive powers to restrict domestic fossil fuel development. However, the cap-and-trade legislation failed in Congress, and domestic “frackers” worked around Obama’s federal restrictions to greatly expand U.S. domestic oil and gas production, mostly on private lands.
One could disagree with Obama’s energy policy — I certainly did, vociferously — but at least it wasn’t self-contradictory.
And Trump, of course, reversed Obama’s policies of energy restriction, encouraged development and fracking, and within one term had achieved the energy independence that had been the bi-partisan goal of U.S. Presidents for the three decades before Obama. Energy prices fell dramatically, the U.S. was no longer beholden to the bad actors among the oil exporting countries, and all of those countries — from OPEC, to Russia, to Venezuela — were left with gaping revenue shortfalls to pay their bills.
Now, for the Biden madness. As far as I can tell, here are the key elements of Biden’s energy policy:
Do everything possible within executive powers to restrict domestic supply of fossil fuels. Executive orders issued in the early days of the administration canceled the Keystone XL pipeline and ended leases for oil and gas development on federal lands. Other orders commanded an “all of government” approach to restricting fossil fuels, so that, for example, financial regulators are now involved in arm twisting banks and other financers to steer clear of the fossil fuel industry. As recently as October 21, the Financial Stability Oversight Council — a consortium of federal financial regulators headed by Treasury Secretary Janet Yellen — got into the game with a press release announcing that it would now be “at the forefront of the agenda of its member agencies” to address “the threat of climate change” by restricting access to financing by fossil fuel developers.
When energy prices inevitably soar, beg Russia and OPEC to increase supply. As early as August, the Biden Administration had begun begging Russia and OPEC to increase supply to keep oil and gas prices from going too high. But wasn’t forcing prices to “skyrocket” the whole idea, the very mechanism by which consumption and “emissions” were to be reduced? And the begging has continued into this month, joined as you might expect by leaders from European countries who also find themselves with energy shortages and soaring prices due to their own suppression of fossil fuel development. As the New York Times reported on November 4, “President Biden and other world leaders have called on countries like Saudi Arabia and the United Arab Emirates to increase production because oil prices, which collapsed during last year’s pandemic lockdowns, have now reached their highest levels in seven years.”
Blame the soaring prices and supply shortages on anything but your own intentional policies. Per that New York Times piece, on November 2 Biden said that the rise in oil and gas prices “is a consequence of, thus far, the refusal of Russia or the OPEC nations to pump more oil.” Apparently in the weeks since then, he or his handlers have had a political epiphany, and have decided that it would be more beneficial to blame the increase in prices on the evil oil companies. On November 17, Biden sent a letter to FTC Chair Lina Khan asking the Commission to investigate “mounting evidence of anti-consumer behavior by oil and gas companies.”
Here’s my question: If soaring oil and gas prices are caused by anti-consumer conduct by greedy oil and gas companies, were those same companies really less greedy when Trump was President and oil and gas prices were falling?
With Obama, at least he appeared to have some understanding that the whole idea of his policies of fossil fuel suppression was to force consumption down through the mechanism of rising prices. But with Biden you’re never sure. Is he just too stupid to understand that his policies were designed to have, and likely would have, the effect of dramatically raising prices and throwing us back into dependency on OPEC and Russia? Or is it that he understood what was likely to happen, but thought that the American consumer/voter would be stupid enough to fall for his tawdry effort to blame some bogeymen for the intended results of his own policies? Is there a third alternative?