Joe Biden sent a letter today asking the Federal Trade Commission (FTC) to look into whether oil companies are illegally increasing prices resulting in the pain American consumers are feeling at the gas pump. This move is not completely unexpected. Last week I wrote about his interview with a local Cincinnati television station where Biden floated the balloon. The rise in gas prices at the pump must mean those evil oil and gas companies are price gouging, right?
As brain-dead reasoning goes from this anti-fossil fuel president, this is a beauty. Send the FTC on a wild goose chase for nefarious pricing action by energy companies instead of looking at his own actions, that’s the ticket. Instead of asking his alleged energy experts, I know, about his options in correcting the situation, he points a finger at Big Oil because it’s a favorite whipping boy of the keep-it-in-the-ground wackos.
“The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump. I believe you should do so immediately,” Biden wrote in a letter to FTC Chairwoman Lina Khan on Wednesday.
“Prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up,” he added. “In the last month, the price of unfinished gasoline is down more than 5 percent while gas prices at the pump are up 3 percent in that same period. This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average.”
“They have announced plans to engage in billions of dollars of stock buybacks and dividends this year or next,” he wrote.
“The bottom line is this: gasoline prices at the pump remain high, even though oil and gas companies’ costs are declining,” the president wrote.
Sleepy Joe only recently acknowledged the rise in prices at the pump for drivers filling up their gas tanks. Now all of a sudden something must be done right now. Being a career politician, Biden’s first instinct is to find a way for the federal government to regulate the free market. The oil and gas industry is one of the most regulated in this country yet Biden would like to strengthen the government’s grip, all the while working to destroy the fossil fuel industry. He began doing so on his first day in office and has continued to do so at every opportunity.
It’s true that there is little any president can do to bring down the cost of fuel once prices escalate. There are ways of proactively avoiding the rise of prices in the first place but those collide with Biden’s agenda. For example, Biden canceled the Keystone XL pipeline and he limited the number of oil and gas drilling leases available for purchase. He’s anti-fracking, too. If the United States goes back to a pre-Trump energy exploration and production mindset, it should not be a surprise that these are the consequences. Biden wants to prove he is the anti-Trump even if that means stopping policies that benefited the country. His inflated ego refuses to allow him to acknowledge that Trump’s policies were right, especially in oil and gas production. For the first time, the United States was energy independent under Trump. In Biden’s America, the president is going hat in hand to beg OPEC to pump more oil – just like the bad old days.
Whoever wrote the letter to the FTC for Biden shows a lack of basic understanding of the American economic system. When supply is down and demand is up, prices rise. When prices go up, the companies make a larger profit. This isn’t rocket science. Biden’s bothered that some oil and gas companies are set to double their net income over 2019. He should cheer them on, especially given the losses taken during the pandemic. If he’s so upset over energy stock prices, he must have been celebrating that godawful day that the price of a barrel of crude oil plummeted to an all-time low during the pandemic. On April 21, 2020, the price of Brent crude plunged to $9.12 a barrel. The price at the beginning of the year, before the pandemic hit, was $70 a barrel. Traditionally, the $70 mark is considered the sweet spot for energy companies. Yesterday, November 16, the price per barrel was $80.56.
The Biden administration is considering releasing some of the supply in the Strategic Petroleum Reserve. There is a limit to how much can be released and it is not a good solution. It’s a short-term band-aid. Biden could also cut U.S. oil exports but that ignites anger from both producers and refiners, as well as our allies abroad. It would likely only increase prices in 2022.
“The impact of a sale would be short lived, and it is not clear that releasing strategic stocks would help the market to adjust any faster than it would otherwise,” wrote Ben Cahill, senior fellow at the Energy Security and Climate Change Program at the Center for Strategic and International Studies.
Goldman Sachs analysts said a release of 60 million barrels “would only be of modest and temporary help.” It would reduce Brent prices at the end of this year by only $3 per barrel, and it could discourage US shale producers from increasing their output, leading to higher prices in 2022.
The industry is pushing back. API rightly says it is policies not the need for more regulation that is the cause of rising prices now.
“This is a distraction from the fundamental market shift that is taking place and the ill-advised government decisions that are exacerbating this challenging situation,” said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute.
“Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply, we should be encouraging the safe and responsible development of American-made oil and natural gas,” Macchiarola said.
Until Biden is willing to do the right thing and allow production-friendly solutions, the price crunch on consumers will continue. OPEC is not our friend and will not make our lives easier. This is just more Biden incompetence coming to bite the American consumer. What we do know is that the problem is not price gouging.