By Mark R. Robeck
Last week, Energy Secretary Jennifer Granholm held a closed-door meeting with a group of oil and gas executives to discuss ways to mitigate rising energy costs. The meeting was prickly at best, as the Administration has unsuccessfully tried to blame oil and gas CEOs for price gouging as energy prices continue to spike heading into a busy travel weekend, despite the fact many of Biden’s own policies are not alleviating the problem. Solutions from the White House have ranged from the comically naive – like White House Press Secretary Karine Jean-Pierre demanding oil companies to simply “produce more oil” – to the reckless – when Jean-Pierre touted the President’s willingness to use emergency wartime powers under the Defense Production Act to lower costs at the pump.
It seems that instead of utilizing the vast wealth energy resources our country has to offer, the Administration is bent on using ineffective approaches that won’t have a durable impact on the cost of energy. Recently, Secretary Granholm visited the Bayou Choctaw Strategic Petroleum Reserve (SPR) in Louisiana ahead of additional oil releases. Despite the daily releases of 1 million barrels of oil per day, some estimates indicate gas prices could still reach an average of $6 per gallon nationwide this summer. As much as President Biden deflects blame, his policies make the problem worse. The solution requires the President to reverse his assault on fossil fuels and commit to concrete, long-term solutions promoting investment in domestic energy production.
Beginning his first day in office, President Biden has been hamstringing fossil fuel producers. The Administration canceled the Keystone XL pipeline, suspended new offshore lease sales in Alaska and the Gulf, reduced acreage available for federal leasing, and imposed burdensome regulations on new energy production and infrastructure. All these actions and others, create uncertainty for investors and add to upward pressure on prices.
Now, Democrats are straining to fix the problem the President helped create.
Take for example one new proposal in Congress. Senator Whitehouse (D-RI) and Representative Khanna (D-CA) have introduced a bill targeted at oil company profits known as the Windfall Profits Tax, which would impose a 50 percent tax on the difference between the current sale price of a barrel of oil and the average price of a barrel of oil from 2015-2019, which is approximately $66 per barrel and apply to companies who produce or import at least 300,000 barrels of oil per day. This was unsuccessfully tried in 1980 under President Carter, which resulted in lower domestic production and a higher reliance on imports. In the long run, this approach could have the reverse of the stated objective and instead reduce the production of oil which limits supply.
On the other end of Pennsylvania Avenue, President Biden’s unlawful release of 180 million barrels of oil from the SPR only reduces national security, but not gasoline prices. Despite the President’s SPR commitment, the average price of gas has surpassed $5.
Congress created the SPR through the Energy Policy and Conservation Act of 1975 (EPCA) following the 1973 Arab Oil Embargo. The SPR is intended to provide reserve supplies of crude oil to counter “severe energy supply disruptions.” The EPCA authorizes the Secretary of Energy to release oil reserves only when there are emergency shortages caused by a sever interruption of imported or domestic supply, or an act of sabotage, terrorism, or “act of God” such as hurricanes, none of which has occured.
In the years since, Congress has authorized non-emergency drawdowns primarily for upgrades to the SPR facilities, but never for offsetting high prices absent a severe supply disruption. The current high prices at the pump are a real national concern, but playing politics with a national security asset is not the way to address the problem. When Energy Secretary Granholm visited the SPR facility just outside of Baton Rouge, Congressman Garrett Graves (R-LA) made this point clear: “the SPR was not established to mitigate bad energy policy. It is designed for use in natural disasters and historical events such as the [1973] OPEC oil embargo against the United States.”
The President’s SPR release is a failed and misguided attempt at a short-term “fix” that will not actually lower prices or stimulate domestic energy production. While harming the nation’s ability to respond to a real severe supply disruption, gas prices are even higher than before the SPR release. This highlights the fundamental problem with what President Biden and Congressional Democrats are actively pushing to confront our country’s energy crisis: policies based on the false claim of short-term price relief while rejecting all long-term plans utilizing our country’s abundant energy resources.
Oil and gas production is extremely capital intensive and investments are recovered only after several years. For energy producers to deploy their capital, policy makers must instill confidence in the long-term recovery of those investments. However, this Administration is sending the opposite signal by imposing policies toward driving oil and gas companies out of business.
Reducing gasoline prices requires new pipeline infrastructure projects, lower regulatory burdens, and expedited permitting decisions for onshore and offshore leasing. Instead of targeting an industry that powers the American economy and provides millions of jobs, energy companies and workers should be supported. Instead of attacking fossil fuels, this Administration should focus on promoting domestic energy production in order to deliver reliable and affordable energy to the American people.
Mark R. Robeck is a former Deputy General Counsel for Energy Policy at the United States Department of Energy.
Originally published by RealClearEnergy. Republished with permission.
For more on the U.S. Strategic Petroleum Reserve, click here.
For more on the cause of high gasoline prices, click here.
Didn’t mention the sale of the reserve to foreign nations. Or is that simply a rumor repeated upon many alternative outlets so you don’t ‘think’ so? You neither confirmed nor debunked it.
Looks like you do have a grasp of many of the issues, but this one may be the only way to shut off the ignorant and short-sighted release of emergency reserves over a self-inflicted supply ‘problem.’
The way they are acting, it’s not a problem, at all that the nation is dependent and reducing availability around the globe.