Joe Biden should get a lifetime Captain Louis Renault Award if this report from the Financial Times is accurate. First off, let’s again recall Campaign Joe Biden on oil drilling and extraction:
Joe Biden in 2020: "No more subsidies for the fossil fuel industry. No more drilling including offshore. No ability for the oil industry to continue to drill period. It ends." pic.twitter.com/90MVJevPmv
— Dan O'Donnell (@DanODonnellShow) March 8, 2022
And if people think that was only for the Democratic primaries, Biden later declared in his final debate with Donald Trump that his policy would be to “transition” from oil because of pollution:
[1:28:14] Trump: Would you close down the– Would you close down the oil industry?
[1:28:17] Biden: I would transition from the oil industry. Yes.
[1:28:19] Trump: Oh, transition.
[1:28:21] Biden: It is a big statement because I would stop–
[1:28:22] Welker: Why would you do that?
[1:28:24] Biden: Because the oil industry significantly — but here’s the deal —
[1:28:27] Trump: That’s a big statement.
[1:28:31] Biden: Well, if you let me finish the statement, because it has to be replaced by renewable energy over time. Over time. And I’d stop giving to the oil industry– I’d stop giving them federal subsidies. You won’t give federal subsidies to the gas and, excuse me, to solar and wind. Why are we giving it to the oil industry?
That was indeed Biden’s explicit policy once he got inaugurated as well. One of his first acts as president was to issue Executive Order 13990, which imposed all sorts of new restrictions and regulatory tangles that practically guaranteed that no new or expanded operations would get off the ground … or under it, as the case may be. That’s precisely what Biden tried to explain in his “incredible transition” comments last month too — that all of this was a deliberate effort to force gas prices high enough so as to discourage investment in the fossil-fuel industry.
Now that the all-too-predictable political results from deliberately fueling (pun intended) a hyper-inflationary cycle have finally penetrated the thick skulls in the White House, suddenly Biden is shocked, shocked that investors won’t put capital in oil and gas production. The Financial Times headlines this revelation as “US oil producers ignore Biden’s rallying call to drill,” but the takeaway is that investors aren’t putting money into an industry that Biden intends to kill:
“When the White House started calling around in a panic, they thought shale oil production could grow sharply in the near term — like in a matter of months or quarters,” said Bob McNally, head of consultancy Rapidan Energy.
“They were shocked to learn that that’s like asking for blood from a stone. It’s almost impossible.” …
One factor behind this reticence is Wall Street, which was burnt by huge losses as domestic oil companies consistently poured revenues into ever-greater growth. Today shareholders are demanding returns.
Included in the report is an interesting graph on why Wall Street is reticent to fund a “drilling spree.” Most of it is “investor pressure,” which is an ambiguous category that could easily encompass the other reasons in the chart. Regulations, ESG issues, and financing get separate mentions, but the truth is that any significant expansion of American production would require large-scale capital investments — and a stable and friendly regulatory environment. Biden still hasn’t rescinded EO 13990, which would have to be a first step toward assuring investors that their large-scale capital would not get destroyed by Biden’s “transitions” as soon as inflation mellowed.
Put simply: No one is going to build another refinery while Biden is in office, especially while EO 13990 is in effect. Few people will even consider heavy investment in years-long oil and gas projects while Biden lies and demagogues about ExxonMobil and other oil companies as scapegoats for his own failures. And why would they? Even in good times, the average net profit margin in the energy industry comes in at less than 6%, while several other industries promise far more return on investment.
Without that kind of long-term, heavy-duty capital investments in both extraction and refining, American capacity will continue to fall. Joe Biden campaigned on a promise to force that “transition,” in fact. If Biden and his team are shocked, shocked to find that investors respond to political signals and incentives, then either they’re lying to us or to themselves. If it’s the latter, then this is the dumbest administration on record, and a worthy recipient of the Captain Louis Renault Award. They’ll get their “winnings” in the midterms soon enough.