Oil prices, as anyone who watches markets knows, are going up. And gasoline prices, as anyone who moves about knows, are also going up, which creates a political problem for the White House. Doubly so, as the only viable solutions are ideologically anathema to the current administration.
The problem is worse in Europe, where energy prices have increased five-fold over the last year. The Europeans have been aggressive in eliminating domestic production of fossil fuels, while concurrently shying away from nuclear energy. This leaves them with very limited options for keeping the lights on, especially as wind strength across northern Europe has decreased some 15%, according to the Financial Times. Europe is therefore almost exclusively dependent on natural gas from Russia, making them particularly vulnerable to increased prices, a sad strategic situation Vladimir Putin is only too happy to exploit.
Things are not quite that bad here, though with higher consumer prices the White House is getting somewhat desperate to do something and is grasping at the few straws that it has left itself. The first option floated by the president was the one most generally and reflexively offered by presidents in the past 40 years — begging the OPEC nations to increase production.
The problem with this approach — aside from the irony inherent in a president rhetorically hell-bent on saving the world from fossil fuels imploring the world to increase its production of fossil fuels — is that is hasn’t worked in the past, and likely won’t in the future. Oil prices are, generally, a market response to fluctuations in demand, which is now back up after a year of worldwide COVID-induced immobility, and OPEC nations tend to do things that are in their best financial interest, not America’s.
Of course, the very existence of OPEC paradoxically belies an exclusively free-market analysis. OPEC is a supra-economic creature, once described by someone with remarkable cheek as a weapon of mass destruction established by the Shah of Iran. It’s one thing that the crafters of the Iranian Revolution decided to keep from the old regime. Iran is not pursuing the construction of nuclear reactors (not to mention their other, more belligerent nuclear hobbies) because they need new forms of energy; Iran is not running out of oil, and couldn’t give a hoot about climate change or the opinion of angry Swedish girls. Needless to say, the cartel denied Biden’s plea, as OPEC has no particular motivation to see the price of oil go down.
So with the OPEC play off the table the administration next raised the specter of pulling from the nation’s Strategic Petroleum Reserve. But that reserve, established during the oil shock of 1975, is there for actual emergencies — a major war, for instance, or a disaster that knocks out gulf coast production and refining capacity for weeks or months. This is not such an emergency, and whatever relief it would offer to domestic oil prices would be short-lived and counteracted by a decrease in domestic production.
Next up is talk about reinstating the ban on oil exports. The thinking is that this will free up domestic supplies to meet domestic demand and thus lower pump prices, but this is the sort of zero-sum, myopic economic thinking that causes so much mischief. Like pulling from the Strategic Reserve, domestic oil prices might indeed go down somewhat, but that will not translate to the pump. A lower oil price will dissuade domestic production, so a portion of the oil that would otherwise be exported will simply not be produced. What is left will be shipped to refiners at higher costs; the dearth of pipeline capacity means that crude must be moved by rail or between U.S. ports in Jones Act-compliant tankers — which are in short supply and accordingly charge more for their services.
The most viable solution, of course, is the one the Biden administration won’t consider — increasing domestic production. The policies he has put in place already, such as axing the Keystone pipeline and curtailing oil and gas leasing on federal lands, like those in Western Colorado, move us far from where we need to be. And of course, Colorado has all but tortured the industry out of existence in the rest of our state.
What this all shows is that fossil fuels are still needed, still crucial to the operation of a modern economy, and no amount of wishful thinking upon a green star will change that in the foreseeable future. Ignoring that reality will leave us, like Europe, with only the bleak option of chaining our national economic life to the whims of OPEC and Vladimir Putin.