Higher gas prices killing your popularity? Look in the mirror, Joe!
Last week, as U.S. gas and home heating prices hit new highs and his approval ratings new lows, President Biden decided to play the blame game. He asked the head of the Federal Trade Commission to investigate whether oil companies have been illegally increasing prices. But there’s no mystery as to why energy prices are up. The president need look no farther than his own White House.
On the very first day of his presidency, Biden vetoed the Keystone XL pipeline, which would have transported an addition 830,000 barrels per day (bpd) of oil to refineries on the Gulf Coast, further reducing America’s dependence on riskier imports. It’s a poorly kept secret that Russia has now replaced Mexico and Saudi Arabia as the second largest U.S. oil supplier. Yes, that’s right: the U.S. is importing 844,000 bpd from Vladimir Putin.
Canada is still the number one source of oil imports to the U.S. But Keystone XL would have guaranteed several more decades of energy security and affordability. The oilsands are the third largest proven oil reserves in the world, and, unlike with conventional oil wells, their production rates do not decline over time.
Ten days later, President Biden halted the issuance of all new oil and natural gas leases on public lands and waters. In many western states these leases account for much of oil and gas production — in Wyoming, for example, 90 per cent. The president’s order was quickly and successfully challenged in the courts, which ruled that the moratorium required congressional approval. But that decision is now under appeal.
The Biden administration’s message to America’s energy sector was clear: You are now a sunset industry. Investors got this message, too, which explains why energy company valuations remain so low, despite rising oil prices and profitability. Why invest in drilling new wells if your government intends to destroy your future markets?
Fast forward to July: with gas prices spiking, the president publicly asked OPEC to increase its output, in hopes of offsetting growing demand as the U.S. and other economies recover from COVID. OPEC predictably ignored him. The higher oil prices rise, the happier its members are. But why would a president want to increase Americans’ energy dependency on the most politically unstable region in the world? Many of his advisers may have been in diapers but Mr. Biden was a senator in the 1970s, when OPEC embargoes tripled the global price of oil not once but twice.
Then in August Biden handed over Afghanistan to the Taliban, sworn enemy of the West in general and the U.S. in particular. The U.S. withdrawal gives radical Islamic movements another safe base from which to wage “holy war” against Israel and the West. It also leaves them state-of-the-art military equipment that can and will be used to destabilize Iraq, Kuwait, UAE and Saudi Arabia — that is, the very core of OPEC. Despite the Abraham Accords, the Middle East seems likely to remain politically unstable and hostile to U.S. interests. Is this really the region Americans want to depend on for energy security and affordability?
Canada is an old and reliable ally of the United States. In terms of energy supply, if the choice is OPEC, Russia or us, the choice should be obvious. As a former Montana governor said, “You don’t have to send the national guard to Alberta.”
Which brings us to the recent COP26 climate change meetings in Glasgow, where the president proudly announced that high energy prices are not “a reason to back off our clean energy goals” but rather “a call to action … (and) only reinforce the urgent need to diversify sources.” But now, less than a week after claiming the mantle of climate change leadership, he has ordered the release of oil from America’s Strategic Petroleum Reserve to bring down the price of gasoline.
The hypocrisy of this policy flip-flop notwithstanding, it will have little effect on America’s increasing dependence on expensive imported oil. The administration’s prioritization of climate change and emissions reduction will continue to drive investment away from new oil and gas exploration. As domestic production stagnates and then declines, the U.S. will become more dependent on imported oil. Unless Washington reverses direction on new oil pipelines from Canada — such as Keystone — this means more dependence on OPEC. It already accounts for 48 per cent of global oil exports and is projected to be at 57 per cent by 2045.
Global oil consumption has already returned to its PRE-COVID level of 100 million bpd, on its way to 108 million bpd by the 2030s. Why? Because the 6.2 billion people who live in developing nations aspire to the same levels of comfort and health enjoyed by 1.3 billion Europeans and North Americans. Higher living standards entail higher energy consumption. Americans consume 21 barrels of oil a year versus a global average of five barrels a year. Add to this that by 2050, the United Nations projects, world population will be two billion people higher — almost all of them in Asia and Africa. In the future as in the past, the world’s consumers will “drive the global energy bus.”
Want to play a true blame game for why Americans will be paying record high prices to fuel their cars and heat their homes this winter? Look in the mirror, Joe!