DANIEL VAUGHAN: Biden’s America: Hot summer and an Energy Crisis

The United States is desperate for real leadership on energy policy. We need it on everything from oil and gas prices to how we’re generating electricity for homes. Energy leadership is the one thing we’re not getting from Joe Biden’s administration. Their policies are getting so bad that they do not help, and they have a negative impact.

The latest proposal the White House is considering comes from consulting Democratic members of Congress. “Bharat Ramamurti, the deputy director of President Joe Biden’s National Economic Council, said the administration has been examining U.S. Senate and House of Representative proposals that could hike taxes on energy producers in order to provide a subsidy to consumers.”

Ramamurti added, “We are very much open to any proposal that would provide relief to consumers at the pump.”

Short-sighted policy.

This sounds like a nice idea — taxing oil companies to help consumers. But it’s the kind of policy that will have the opposite impact. Prices will run higher, and oil companies won’t invest in new drilling or refining that would relieve costs.

Let’s take the part that sounds the best: helping consumers by giving them a subsidy. If consumers get government help in paying for gas, it will help them afford a higher gas price and purchase more. In short, demand for gas will go up and force prices higher. Government subsidy is higher demand.

The second part relates to taxing oil companies. The government would discourage capital investment by increasing taxation and specifically targeting these companies in the middle of an energy crisis. We need these companies to invest in new drilling and opening up new refineries to bring more supply. Taxing “windfall profits” eliminates capital investment.

The White House is looking at a policy that would increase demand while lowering the supply. This approach is short-sighted in the extreme. But they’re pursuing this because it’s the only thing Democrats can think of in a crisis.

Prices going up.

OilPrice.com notes that “Meanwhile, the national average gasoline price hit another record at $4.715 a gallon on Thursday. That’s up from $3.041/gal at this time last year. With less than $0.25 from $5.00, the national average could hit $5/gal around June 17, Patrick De Haan, head of petroleum analysis for fuel-savings app GasBuddy, said on Thursday.”

They add, “Gasoline at $5 will certainly be politically painful for the Biden Administration. Yet, the only short-term “fix” for this is a slump in oil demand through a recession—an even more painful outcome for the economy, employment, and consumers.”

It’s important to remember that we’re talking about average gas prices across the entire country. In some places, it will be much higher than $5 gas. Out in California, it wouldn’t be shocking to find places where gas is more than $10 a gallon.

News waves got made in the latter part of last week when OPEC+ promised to increase the oil supply. That’s a great promise — if it happens.

Talking to CNBC, Paul Sankey of Sankey Research said, “The problem is that countries in the OPEC+ alliance have not been meeting their targets … The whole system of OPEC has kind of broken down right now.”

More demand is on the horizon.

The higher prices and demand we’re experiencing now are occurring in an environment without China. Remember, much of China has been in lockdowns for a while now. They’ve had significantly less need for gas or oil. The moment they reopen that changes.

Saudi Arabia, which isn’t returning the Biden administration’s calls right now, is rushing to China’s aid on oil. “China, which relies on imports for 70 per cent of its requirements, is trying every means possible to keep its massive industrial system humming and its slowing economy on track.” China and the Saudis are getting cozy as a result.

And with China likely to begin fully reopening from COVID-19 soon, their oil demand will cause prices to surge. Saudi Arabia is willing to send oil to China, but the United States will likely get stuck footing a much higher bill.

It’s not just gasoline. Diesel prices continue to surge, impacting everything downstream from industries that rely on diesel (farming, transportation, industry, and more).

States across the western and midwestern United States warn that energy blackouts are coming to a home near you. The energy grid cannot handle its load, which should end any talk of electric cars taking over.

We’re in an energy crisis. That requires leadership.

The central lesson here is that energy independence is vital for America. We need domestic producers who can operate and provide Americans with petroleum, which we use in various products. That includes every part of the supply chain from drilling, pipelines, refining, etc.

We need a White House that faces reality and leads the way forward. Instead, we get bad policies and empty platitudes about how great electric cars will be someday. It’s a complete failure from beginning to end.