Despite the United States confronting some of the highest energy prices in its history, the Biden administration has canceled oil and gas lease sales in the Gulf of Mexico and Alaska’s Cook Inlet.
According to the American Automobile Association (AAA), national fuel prices are averaging out to a whopping $4.43 per gallon of regular gasoline. Diesel is much higher at $5.56 and is speculated to endure mass shortages in the coming months as reports from the Northeast have indicated there are already seeing record-low inventories. Over the past twelve months, fuel prices have risen by nearly $1.50 per gallon and most market analysts expect rates to continue moving upwards through the summer. Though they’re not all in agreement as to who should be blamed for our current predicament.
That’s because there are a plethora of likely suspects.
As the government agency officially responsible for canceling the leases, the Department of the Interior claimed it was actually the energy sector that didn’t want to drill in Alaska.
“Due to lack of industry interest in leasing in the area, the Department will not move forward with the proposed Cook Inlet OCS oil and gas lease sale 258,” a DOI spokesperson told Fox Business in a statement on Thursday.
“The Department also will not move forward with lease sales 259 and 261 in the Gulf of Mexico region, as a result of delays due to factors including conflicting court rulings that impacted work on these proposed lease sales.”
Lease sale 257 (also located along the Gulf) was similarly invalidated in January.
Meanwhile, the oil industry is currently enjoying record profits as energy prices skyrocket. The New Yorker even went so far as to suggest that the industry was actively engaged in war profiteering — citing ExxonMobil having made $5.5 billion (after taxes) within the first three months of 2022, Chevron’s $6.3 billion, and ConocoPhillips’ $5.8 billion. Here, we have the common excuse that the war in Ukraine is the true culprit behind surging oil prices and that the situation has been made immeasurably worse by greedy energy companies.
It’s a hard position to disagree with, especially since we know wars always tend to drive up the cost of raw materials. Russia is also an important oil-production nation with its actions directly influencing the global market. Though your author would argue that the brunt of the burden is being placed upon neighboring states, especially Germany. While the situation in Ukraine has undoubtedly contributed to today’s energy problems, crude prices spiked dramatically in late 2020 as oil futures began trading on the assumption that Joe Biden would soon be in the White House.
Some of the speculative action was the result of rebounding prices after demand cratered at the start of the pandemic. However, the Biden administration had expressed a strong interest in transitioning the United States toward all-electric vehicles and what it said would become a more environmentally conscious economy. Unfortunately, just about every nation that’s done likewise has endured rising energy costs as penance for the alleged progress.
One of Biden’s very first actions as president was an executive order to suspend federal oil and gas leases. While this was immediately challenged by Republican-led states challenged the ban, and a federal judge ruled in their favor overcoming the suspension and opening a lease sale for more than 80 million acres in the Gulf of Mexico for oil drilling, environmental groups sued to stop the leases in the courts and ultimately succeeded. Last year also saw the White House calling for an end to tax benefits for oil and gas production. Though the most contentious decision was Biden’s cancellation of the Keystone XL’s cross-border permit — effectively ending the 12-year project to funnel affordable fuels down from Canada and into American refineries.
Last month, the Interior Department stated that would be restarting the sale of oil and gas leases on federal land. However, the agency reduced the amount of land under consideration by 80 percent and increased the sum of royalties energy companies would be required to pay the government if they extracted anything of real value.
Despite the Biden administration having asked the industry to produce more oil to help lower costs, it has repeatedly taken actions that stifled domestic production. But its current position is to blame the war in Ukraine for the high cost of energy and the swelling inflation that’s making everything worse.
Inflation is also part of the problem and it’s not one limited to either party. Years of relatively unfettered government spending were placed into overdrive during the pandemic, only to be followed by massive spending bills. The United States is currently confronting currency devaluation on a scale not witnessed in decades and it’s only expected to worsen into the fall of 2022. This creates a snowball effect on all commodities, including those reliant on petroleum extraction.
The reality of the matter now hinges largely on which news outlets you consume and what their particular bias happens to be. A majority of legacy media sources and the Democratic Party have decided to focus on Ukraine and oil companies. Meanwhile, independent media, Fox News, and the Republican Party have zeroed in on decisions made by the White House and an inability (or unwillingness) to spur production — suggesting it’s at odds with the green agenda.
They’re all correct in their criticisms. However, the U.S. government only has direct control over its own spending and how it decides to regulate industries that have long since abandoned the free market to become intertwined with political action. If the price of gasoline is to come down, there are only a handful of realistic solutions. Government can attempt to strongarm the industry into increased oil production or deregulate it in the hopes that competition will eventually emerge to help tamp down prices. While the latter option would take years to yield any results, the former could see changes within a matter of months. But the core issue of supply and demand is what’s at play here and nobody should assume a monopoly of ultra-massive oil concerns is going to increase output while profits are so high.
Perhaps Alaska was indeed too expensive for them to survey and tap.
Even Donald Trump had a hard time getting more than a handful of interested parties when he opened the Alaskan Arctic National Wildlife Refuge (ANWR) for drilling in August of 2020. Climate activists also made the plan look unsavory on the national scene, despite local residents being broadly in favor of the prospect of the oil industry adding new jobs. The state itself was interested. But there’s little incentive for oil concerns to invest when they’re likely to make more sitting back and letting high prices do the hard work for them. And the timing of opening ANWR coincided with regional lockdowns that discouraged oil consumption to a point where per barrel prices had pitched into the negative.
The Alaskan argument is harder to attach to the canceled Keystone XL or the suspended leases based around the Gulf of Mexico, however.
While I’m inclined to agree that today’s oil prices are influenced by a multitude of factors, tough decisions need to be made if the economy is ever to return to normal. Tragically, what few actions have been taken by the White House and Congress to address fueling seem wholly designed to worsen the matter. Whether that’s coincidental, part of advancing the Biden administration’s green agenda, or simply the result of U.S. leadership being woefully out of touch with the plight of the common man is anybody’s guess. But it’s becoming increasingly ridiculous to suggest that our present course of action is somehow the correct one as evidence to the contrary continues mounting on a near-daily basis.
[Image: evgenii mitroshin/Shutterstock]
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