Americans care about what they pay at the pump, and less oil means higher gas prices. America could preserve energy independence by ramping up its own production. Unfortunately, the Biden Administration has taken the opposite approach.
Most recently, when the Organization of the Petroleum Exporting Countries announced it would cut oil production by 2 million barrels a day, the Administration reacted by purchasing oil from Venezuela and releasing additional oil from the Strategic Petroleum Reserve (SPR).
Daniel Di Martino, a Venezuelan economist and fellow with the Manhattan Institute, said to me, "This is a misguided and unethical move that will help the Maduro regime stay in power and cost Venezuelan lives. But it won't have any benefit to America. Biden forgets that Venezuela is an OPEC member and as such follows OPEC quotas so any increase in production from Venezuela will likely be met by a decrease from other nations."
Unlike many countries, America is fortunate to have the ability to be energy independent, with large reserves of oil and natural gas.
According to the U.S. Energy Information Agency, the United States holds over 373 billion barrels of recoverable crude oil reserves, over 50 years’ supply, and almost 3,000 trillion cubic feet of technically recoverable natural gas, a 100-year supply. The Institute for Energy Research estimates that America’s conventional and unconventional reserves add up to nearly 300 years of energy supply.
Between September 2021 and September 2022, the price of gasoline rose by 44 percent. Energy costs have risen much faster than the average annual inflation rate of 8.3 percent and are set to move higher as OPEC cuts production.
Trisha Curtis, president and CEO of PetroNerds, a Denver-based strategic advisory firm, told me, “The Biden administration's response to OPEC's decision to cut two million barrels a day is a sign of true desperation. The SPR is already at levels not seen since 1984, putting the U.S. and the world on a path to higher oil prices in the future. The Administration has been unable to achieve a relief in sanctions on Iran and is now looking at Venezuela, again—even though Venezuelan production is heavily connected to both Russia and China.”
Ms. Curtis, a national expert in oil production, explained that the United States could begin producing another 2 million barrels per day by immediately re-approving expiring Federal permits. Reapprovals have virtually stopped under the Biden administration.
Additionally, the Administration could immediately accelerate lease sales and permit approvals on federal lands and end the moratorium on federal and offshore lease sales. Approving Keystone XL and accelerating the final development of the nearly finished pipeline would bring as much as 1 million barrels a day of Canadian crude to the Gulf Coast.
Other Executive Branch agencies and Congress are slowing production and delivery of oil and natural gas.
The Federal Energy Regulatory Commission is making it even harder to put new pipelines in place to carry oil and gas from the interior of the country to the coasts, where it can be exported.
The Interior Department has flat-out stated that oil and gas drilling should not be a U.S. priority. It has called for fewer leases, higher royalties from oil and gas leases, and a more elaborate bidding process to screen buyers.
Securities and Exchange Commission Chairman Gary Gensler has proposed rules to require companies to disclose information about: governance and management of climate-related risks; how climate-related risks will affect companies’ strategy and outlook; and the effects of climate events such as hurricanes and wildfires on financial statements. The agency can discourage investment in firms with investments in oil, gas, and coal, saying that such investments pose a risk to the environment. These firms would find it harder to get capital to expand, because they would face higher rates to borrow and potential calls for stock divestment.
The Office of the Comptroller of the Currency, which regulates banks, has appointed Chief Climate Risk Officer Yue Chen to assess and monitor climate-driven risks to banks. If she deems investments in oil and gas “risky,” banks will be discouraged from lending to oil and gas companies—reducing resources available to develop resources.
Some members of Congress are getting into the Defund Oil and Gas movement. At a Sept. 22 hearing of the House Financial Services Committee, Democratic lawmakers attacked bank CEOs for investing in conventional fuels and called on them to phase out these investments.
The Federal Trade Commission is considering investigating oil and gas companies for price gouging—even though people know that lower supply always leads to higher prices.
Congressional talk of windfall profits taxes acts as a further discouragement to increased production.
With an about-face on energy policy—one that focused on increasing rather than decreasing reliable domestic energy production—the Administration could change expectations about the direction of U.S. energy production, resulting in an immediate decline in the price of oil and natural gas. Prices are set on expectations of future production, not on present production. That’s why oil prices rise when hurricanes are forecast, before rigs have been damaged.
Two years of oil and gas restrictions, reduced refinery capacity, and political and social pressure on companies across the value chain of oil and gas have affected America’s ability to raise output quickly in the face of rising oil prices. It’s not too late to lower oil prices, but it will have to start at home.
This piece originally appeared in Forbes https://www.forbes.com/sites/dianafurchtgott-roth/2022/10/07/biden-administration-desperately-cozies-up-to-venezuela/?sh=7edd293451f8