President Biden and his team have acknowledged in recent weeks that there is not much he can do to address soaring gas prices and inflation, and the actions he has taken so far, such as a record-breaking release of oil from the country’s strategic reserves, have not worked. This past Tuesday he continued his denigration of the oil industry and sent a sternly written letter to seven oil company executives urging their companies to take “immediate actions to increase the supply of gasoline, diesel, and other refined product.” While he tries to misdirect the American public by castigating “Big Oil” and talk of oil leases, Biden’s letter simply reveals his ignorance of simple supply and demand, how capital investments work, and the detrimental impact his policies are having. Quite literally he is causing the steep inflation that is destroying the nation’s economy.
While oil leases are important the general “climate” for capital investment in the oil industry now is the much bigger issue. Yes, the Covid shutdown whipsawed normal supply and demand, initially glutting the market and dropping prices and profits needed for reinvestments like modernizing refineries and building pipelines etc. The nation’s newest refinery with significant capacity is Marathon Oil’s facility in Louisiana which came online in 1977—45 years ago. Chevron’s CEO Mike Wirth said in a recent interview that: “You’re looking at committing capital 10 years out, that will need decades to offer a return for shareholders, in a policy environment where governments around the world are saying: we don’t want these products, my personal view is there will never be another new refinery built in the United States…We’re receiving mixed signals in these policy discussions.”
He’s being polite, there is no mixed signal. The Biden Administration campaigned on “ending fossil fuels” and he is delivering on that promise by discouraging capital investment, creating restrictions, driving up the costs of production, and drying up financing creating the New Green Deal.
Oil refinery CEOs couldn’t instantly increase production today even if they wanted to with the considerable lead times in bringing on oil and gas wells as well as the lack of refining capacity even if the US had an oil friendly financing/capital investment environment. CEO Wirth indicates: “We need to sit down and have an honest conversation, a pragmatic and balanced conversation about the relationship between energy and economic prosperity, national security, and environmental protection. We need to recognize that all of those matter.” Too bad the Biden administration doesn’t understand that.
Greg Beck is retired Army officer committed to the values of Duty, Honor, Country and continues his career of professional excellence and service to the Nation, currently as a military contractor and community leader.
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