Biden’s Low-Energy Policy By Dominic Pino
https://www.nationalreview.com/magazine/2022/04/04/bidens-low-energy-policy/#slide-1
The long-term danger in the president’s antipathy to fossil fuels.
Gas prices are high. Voters are upset. And Republicans want to blame Joe Biden’s energy policy.
It might be smart politics to do so, but it’s not exactly honest. Joe Biden has been in office only a little over a year, and he hasn’t undone decades of American energy progress. Oil production has risen on his watch, and depending on the week, we are still a net exporter of crude oil and other petroleum products.
That doesn’t mean Biden’s energy policy is any good. On the contrary, it should be opposed at every turn because it would make today’s anomalous situation the norm for years to come.
First, let’s dispel some myths about so-called energy independence. After a steady decline in net imports that began around 2006, the U.S. became a net exporter of crude oil and other petroleum products for the first time ever the week of November 30, 2018.
The United States has never been a net exporter of crude oil alone, and it has never really been all that close to being one. The week of April 10, 2020, saw U.S. net exports of crude and other petroleum products reach their highest level on record, at over 2 million barrels per day. That week, the U.S. imported over 2 million barrels per day of crude oil on net but exported over 4 million barrels per day of other petroleum products on net.
The reason for that is America’s refineries. There are 126 oil refineries in the U.S. and only about 700 in the entire world. Companies from around the globe send their crude oil to American refineries, which counts as crude-oil importation to the U.S. Then the refined products get shipped around the world, which counts as other-petroleum-product exportation.
American refineries need crude imports, about 60 percent of which come from Canada. Western Canadian Select comes from the Alberta tar sands — which are as nasty as they sound — and is heavy (very thick at room temperature) and sour (having high sulfur content). Only a few refineries in the world, most of them in America, can process it. A Phillips 66 refinery near St. Louis, for example, underwent $3.8 billion in upgrades in 2012 to be able to refine large amounts of Canadian oil.
Refinery capacity is the fundamental strength of the American petroleum industry. That’s why no matter what happens with domestic crude-oil production, the U.S. will still import large amounts of foreign oil.
There’s nothing wrong with that. Unrefined crude oil is pretty useless. Given the choice between lots of crude and lots of refineries, the latter is preferable.
But this is America, and we don’t have to choose — we have lots of crude oil, too. Much of our oil is light (very fluid at room temperature) and sweet (with low sulfur content), so it’s easy to refine. As a result, when America pumps more oil, lots of other countries want to buy it because their less advanced refineries will still be able to process it.
From 1975 until 2015, Congress banned the export of American crude oil. Then, in a fun bit of interests colliding in strange ways, the Obama administration and congressional Republicans worked to lift the ban (Democrats traded it for renewable-energy tax credits) over opposition from American refiners (which enjoyed a captive domestic market) and environmentalists. Customers all over the world can now purchase American crude, which is a great boon for American producers.
After hovering around 5 or 6 million barrels per day for years, U.S. crude production took off starting in 2011, with the advent of fracking. Production had gotten up to about 9.5 million barrels per day when it began to fall again in 2015. The new, abundant oil supply had pushed prices down to the point at which it didn’t pay to drill anymore. But then came the removal of the export ban, and production took off again in 2016.
U.S. production peaked at around 13 million barrels per day in late 2019 and early 2020, and then the pandemic hit. The demand for oil fell through a trapdoor, and production plunged below 10 million barrels per day in May 2020. (Even that depressed level of production was nearly double the normal level between 2000 and 2010, to give an idea of how much American production has expanded.) Turning off oil wells is much quicker than turning them back on, but capacity is now returning. Oil production is back around 12 million barrels per day.
If anything is holding oil producers back right now, it’s a sand shortage. Fracking works by forcing a pressurized blend of sand and water into the ground. Across the oil and gas industry, producers use over 100 million tons of sand per year, and demand rises with oil prices. If oil companies even can get more sand, they’re paying over $70 per ton where $20 per ton was previously normal.
After oil companies expanded rapidly and made low profits during the past decade, investors are skittish about giving them more money. Many of the companies actually drilling in the fields are small, independent firms, and they’re having a hard time affording more equipment. The pressures of “woke capital” don’t help, either.
Technological developments, a pandemic, prices of other commodities, equipment constraints — none of that has to do with Barack Obama, or Donald Trump, or Joe Biden. One of the many benefits of a market economy is that we don’t see sharp changes in industry patterns when the president changes. The oil market is no exception.
Republican talking points notwithstanding, Joe Biden has not decreased U.S. oil production. According to the Wall Street Journal, oil executives and industry analysts “generally agree that the primary constraint is nuts-and-bolts limitations in America’s pandemic-battered oil patches, rather than regulatory constraints imposed by the Biden administration.” The third-largest oil-producing country starting an unprovoked war of naked aggression makes things worse.
The problem with Joe Biden’s energy policy is not that it caused the high gas prices we currently see. The problem with Joe Biden’s energy policy is that, if it were adopted, the present situation would be liable to happen again down the road — and the wound would be self-inflicted.
The Germans are experts in self-inflicted energy wounds. They made themselves dependent on Russian oil and natural gas as a result of a years-long campaign against nuclear energy in favor of renewables that don’t work well enough to power a large country yet. But the solution to Germany’s problems now is to make better decisions ten to 20 years ago. Nixing the Nord Stream 2 pipeline helps to prevent further energy dependence, but it doesn’t undo over a decade of bad energy policy. Chancellor Olaf Scholz doesn’t have a time machine. His predecessor Angela Merkel made his bed, and he has to lie in it.
Biden’s energy policy, if implemented in full, would leave an American president one to two decades hence in a situation similar to the one Scholz finds himself in today. Anyone who thinks John Kerry’s views of energy are worth promoting should not be trusted to run a gas station, let alone make energy policy for the world’s most powerful country. Biden’s energy policy prioritizes the transition away from fossil fuels, whether through billions in subsidies for renewable energy or appointing Federal Reserve officials who want to use financial regulation to punish oil companies. The radical progressive environmental movement that’s part of Biden’s coalition uses environmental laws to drown energy expansion in a sea of litigation.
Since it’s much easier to shut things down than to invent new technology, foreign fossil-fuel production would have to make up for the lost American production. Biden’s energy policy encourages that in two ways. First, by going abroad and simply begging other countries, such as Saudi Arabia, the UAE, and even Venezuela and Iran, to produce more oil. And second, more crucially, by making it difficult to transport oil by opposing pipeline construction.
It’s not just Keystone XL that progressives oppose; they want to make it harder to build pipelines within America as well (and they’ve successfully stonewalled multiple projects in New York). If oil can’t move through pipelines from where it’s produced to where it’s refined — and from where it’s refined to where it’s consumed — foreign alternatives become more attractive. American West Coast refineries are built for light, sweet crude, but lacking pipeline capacity to get it from Texas, they import it from elsewhere. New England lacks sufficient pipeline capacity to get refined products such as heating oil, so those states often import them too.
Making matters worse, we can’t fully utilize one of our most bountiful natural resources — our waterways — because of the Jones Act, a protectionist law that has left us with a tiny fleet of outdated, expensive ships to transport oil. That law isn’t Biden’s fault, but he does have the power to waive some of its requirements, and he should call for its repeal.
Biden’s energy policy looks at America’s natural endowments and industrial prowess with embarrassment instead of pride. We don’t know what will cause the next energy crisis, but the U.S. must avoid making matters worse for itself. That is why Biden’s energy policy must be stopped.
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