High oil prices mean high gasoline prices.
There is a world price for oil.
I don't blame Biden. I don't blame Trump, either.
The price of oil in the U.S. is in close sync with the price of oil in Europe. Oil moves from producing countries to wherever it gets the best price. "Brent" is Europe's price, in blue. West Texas Intermediate is the U.S. price, in red. Demand is up all over in 2021 as the world's economies have come back to life. Most people consider that a good thing. I do.
 |
| St. Louis Fed |
In 2018-2019 Saudi Arabia and Russia were having a price war over oil. The two countries were competing for market share and Russia had a vulnerability. Russia needed a higher price to sustain its oil-export based economy. Saudi Arabia could exploit that by increasing production and lower the world price. It didn't just hurt Russia. It caused a political problem in the USA. U.S. drilling rigs were shutting down. Oil-patch employment was down. Republican officeholders in oil-producing states were unhappy.
 |
| Reuters |
During the 2020 COVID year of low demand, the oil glut became extreme. COVID had us shut in, so we weren't driving as much. Our minds were on COVID; we took cheap gasoline for granted.
The fracking technology that flourished in Obama's second term created energy independence for the U.S. Fracked oil is more expensive to produce. It was uneconomical during the Saudi-Russia price war. Oil-state Republican officeholders filed legislation demanding American troops be withdrawn from Saudi Arabia unless the Saudi government cut oil production. That gave Trump the leverage he needed to demand Saudi Arabia reduce oil production. They agreed to it. Russia was happy. American oil producers were happy. American oil-state officeholders were happy. Trump was happy. Americans were still out of work and businesses were shuttered, but at least gasoline was cheap.
Now that the U.S. economy is rebounding demand for oil is in better sync with supply. The recent spike in oil prices from a likely-sustainable $60-80 dollars a barrel to over $100/barrel is due to the uncertainty of supply due to the Russian invasion of Ukraine.
High gasoline prices today are not an American problem, caused by neither Biden nor Trump. They are a world problem caused by uncertainty over whether a pipeline or refinery or shipping route might get closed. There is, after all, a shooting war going on. People who want energy independence in the U.S. for geopolitical security can get their wish, but it comes at a cost. The U.S. has a great deal of oil for our needs, but only if we can frack it to get it. We can produce as much as we need, but not necessarily the kinds of oil that we need, and not at the lowest price. Even if we are energy independent, the U.S. will still import it and export it.
Fox News complains that Biden failed to persuade Saudi Arabia to increase production. "Biden failed!," Fox News says. That is correct. He didn't offer them something they really wanted. That may be a good thing. I am uncomfortable with the U.S. being dependent on Saudi oil, and therefore under their influence on our policies as regards Israel, Iran, Yemen, and elsewhere. American policy toward Saudi Arabia and Russia is friendlier under Trump than under Biden. Biden's position is easily defensible, especially now given the Russian invasion, but he needs to advocate it.
The current spike in gasoline prices is a political loser for Biden as it stand now because Biden has not yet put it into a context of American energy and policy independence. His task is made harder, too, because the voters and officeholders in energy-producing states--the people most helped by a policy of higher sustainable oil prices in U.S. markets--have little desire to credit Biden. The task is made even harder because the American left is hostile to oil producers. We need them but hate them. Any Biden policy which creates energy independence keeps fossil fuel companies in business a while longer. That is defined as helping climate-destroying price gougers. The American left wants energy independence without fossil fuels, but the technology and infrastructure for that is in the future. We need our tanks filled today.
Further reading: Raw Story Paul Krugman, NY Times
11 comments:
As someone whose number #1 issue BY FAR is Climate Change, seeing $5 a gallon gas makes me happy. I'd love to see it $10 a gallon (or more). The fact is that if we want to have *any* prayer, remote though it may be, of keeping the world under 1.5 degrees Celsius of warming as stipulated by the Paris agreement, 60% of the known fossil fuel reserves need to stay *in the ground.*
It's not a joke. And it doesn't matter to me if $5 a gallon gas hurts Biden politically. If you think of the devastation caused by Climate change as the equivalent of being in a car driving straight toward a cliff, Biden is lightly tapping the brakes taking us down from the 80 MPH Trump was flooring it to, to a more reasonable 55-60. The problem is he's still driving us over the cliff.
We need to be slamming on the brakes as hard as possible RIGHT NOW because driving over a cliff means almost certain death. And unmitigated Climate change means almost certain extinction for humanity (along with 90% or more of every other living thing on earth).
Bring on the higher gas prices and let's do EVERYTHING possible (including nuclear power) to avert disaster.
Much of the increase in gas prices is obviously related to war in Ukraine and the related sanctions against Russia. I hope those who felt we should do more to help Ukraine won’t mind paying more for gas, but I’m afraid what many of them really mean is, “We should do more for Ukraine as long as it doesn’t cost me anything.”
Sorry, but Biden and the Democrats are largely to blame. No politicized spin will alter that, even among comparatively inattentive moderates and independents, because bad prices on gas and so many other connected commodities will increasingly command their attention at least through November. Energy prices have “spiked” steadily since Biden was inaugurated. His Nord Stream II decision enriched our enemies, and his Keystone impoverished us. Sure, natural gas and oil are complex international markets with varied ownership of access to production, we are lectured, and the pipelines were prospective. That dog won’t hunt. Prices today are in large part driven by safe supply tomorrow, and by location, location, location when it comes to point A to point B. Meanwhile, out of touch elites like Secretary Pete Antionette sniff, “Let them buy electric”, even as his administration continues to play shell games granting thousands of useless permits while blocking true new domestic production as a sop to moralizing Green levelers, and re-engaging, hat in hand, the deranged, hate-soaked mullahs of Iran. Biden and Harris appear equal parts weak and stupid….yet self-satisfied.
Unprecedented electoral carnage is headed the Democrats’ way this fall, despite Republicans hardly covering themselves in glory as a coherent and programmatic opposition party. This is true mostly because Biden & Co. won’t acknowledge ANY missteps whatsoever. They still claim uninterrupted, nonpareil competence and execution, and with a straight face. It’s all going as they planned or at least expected, they lie, from Afghanistan to Ukraine, COVID policy to the economy. If so, why didn’t they do something to prevent it, or mitigate it? Regular folks understand and loathe—and punish— such overweening, insulting arrogance.
Biden shut down the Keystone XL pipeline and stopped all new leases for oil/gas drilling on federal lands. Biden does not share the blame for all of the rise in gasoline prices, but is appropriately blamed for his contribution to it.
Disciples of Climatollah Thunberg may approve of Biden‘s actions, but the American people do not.
Low Dudgeon is in an incendiary high dudgeon today. Needed welding goggles to read the post.
Worthy of Hunter S. Thompson and Matt Taibbi, two of my favorites …
"Regular folks understand and loathe—and punish— such overweening, insulting arrogance."
Oh, really? Then why are the leaders of the attempted coup not being punished, instead of just Trumps chumps?
The U.S. produced 11.28 million barrels of oil per day in 2020 (before Biden took office) and is producing 11.85 million barrels per day in 2022. Prices went up after Biden took office due to supply and demand. Free market conservatives should be fine with that.
Then Russia invaded Ukraine, and now prices are really going up. Those who claim they want to help Ukraine should be fine with that.
Republicans whine because for them the issue isn’t about economics, but their antipathy toward Biden.
Maybe we can consider reopening Federal Lands when Big Oil uses up the 9,000 leases currently sitting unexploited. And the Canadian Company exploiting yhe boondoggle of the Keystone XL extension of the Keystone Pipeline has shut down (thankfully) their plans for shipping Canadian tarsand oil to China, by way of Houston
Dear Unknown,
Please help me refine my point. What is the source for the statistics on USA energy production in 2020 and 2021.
Peter sage
I just got it from CNBC who got it from Dan Yergin, vice chairman of IHS Markit: https://www.cnbc.com/2021/12/30/us-oil-production-to-increase-further-in-2022-oil-expert-dan-yergin.html
Also, I wasn't trying to remain "unknown." I thought I had put in my name.
Looking at current prices ignores longstanding US policy regarding energy independence.
If the US had supported electric vehicles and public transportation decades ago we wouldn't be held hostage to oil companies or oil-rich countries.
But the republican party puts profit over everything, including public safety. That's why we are having the same discussions about gas prices that we've had for decades.
Foolish.
Post a Comment