By Robert Lyman and Jay Lehr | Aug 4, 2022 | Energy, Global, Politics @ Malcolm Out Loud
One of the central premises of
current US policies with respect to energy, the environment, and the
economy is that governments understand what drives energy markets so
well that they can, in effect, engineer the outcomes that they want,
whether those relate to supply, demand or prices. The Biden
Administration offers a useful demonstration of whether that premise is
correct. Well, of course, it is not correct. It borders on insanity that
these unskilled morons could manage a subject they have virtually zero
understanding about.
Reacting to sharply higher prices
for gasoline and other refined oil products, the Biden Administration
has appealed to OPEC countries to increase crude oil production and
reportedly offered some concessions to adversaries like Venezuela and
Iran if they will increase production. It has demanded that domestic
producers increase their production. President Biden has recently told
US oil refiners that they must rapidly increase capacity.
The higher profits that refiners have made in a period of product scarcity, Mr. Biden has said, are “not
acceptable.” Understand our shortage of oil and doubled prices at the
gasoline pump are not only the Biden Tyrannies plan but likely
controlled by Obama in the shadows on his $14 million beach house along
with George Soros and a number of equally evil communists. It is time to recognize this and broadcast it.
Why, though, are gas prices rising? It starts with the cost of crude oil.
The
average price of a barrel of crude oil (West Texas Intermediate, the
benchmark in North America) rose from an average of about US $68 in 2021
to US $116 on June 15, 2022. This was due mainly to the effects of the
sanctions imposed on Russian crude oil and the resulting uncertainty in
world oil markets. So, other things equal, the increase in crude costs
would raise gasoline prices by about 70 percent.
Except
that other things are not equal. Taxes provide part of the answer. The
federal and state governments impose excise taxes, sales taxes, and in
some cases, special charges related to carbon dioxide emissions. The
federal excise tax is 18.4 cents per gallon. The state taxes vary
widely, from 16 cents per gallon in Hawaii to 58 cents per gallon in
Pennsylvania. Taxes are probably rising fastest in California, where the
state now charges 51 cents per gallon.
A
less-understood cause of the increase is the lack of refinery capacity.
Around three million barrels per day of global refining capacity was
closed during the COVID pandemic, and one million barrels per day of
that was in the United States. Some US refineries were shuttered and/or
are being converted to producing biofuels in keeping with the policy
objectives of the Biden Administration and the major subsidies being
provided for biofuels production. Biofuels are worthless to the economy,
except they allow the price of corn to the farmers to increase between
25 and 50 cents a bushel. A complete subsidy scam that punishes every
American consumer.
By the end of 2023,
according to the US Institute of Energy Research, an additional 1.69
million barrels per day of US refinery capacity is expected to close as a
result of unwarranted EPA rules and restrictions intended to do what
they are doing. Ultimately brings the public to its knees, begging for
energy. Operating near full capacity, refineries have little flexibility
to respond to short-term changes in supply or demand.
Further,
several factors are causing sharp increases in diesel fuel prices.
These have included a surge in natural gas prices (used in the
production of diesel) due to increased European demand, a reduction in
the sulfur content of maritime fuels, and increased US exports of diesel
fuel to Europe to displace Russian supplies. US diesel fuel inventories
have dropped to about 104 million barrels, a two-decade low. Once
again, the object is to make capitalism look bad to a public not
educated in any way about the ways of oil and natural gas either in the
ground or above the ground.
US refiners are now
increasing jet fuel and diesel production instead of gasoline. This has
significant spillover effects in terms of reducing gasoline inventories
and increasing the price of gasoline.
So what went wrong? Nothing went wrong; it has gone as planned by evil communists pulling all of the demented Biden’s strings.
If
the Biden Administration had not strongly discouraged the additional
development and transportation of domestic oil supplies and limited
leasing for exploration and development on federal lands, it would have
increased domestic production and helped to lower crude oil prices. But
why should they want to do that? They are power mad and think they can
get away with anything.
If the US government had not
provided such large subsidies for biofuels, there would be more refining
capacity to handle surges in demand. If governments and
environmentalists had not used regulations to block the construction of
new refineries (only one built in the last thirty years), there would be
more flexibility in the refining industry. If governments in Europe,
driven by climate policy, had not left themselves so reliant on oil
supplies from Russia, the industry there would not be seeking to bid
away the refined oil product supplies needed in North America. If the
state governments were not so intent on taxing drivers, gasoline prices
would be lower.
But this was all the plan, and it is time to recognize it.
Today, neither governments nor industries can simply “flip
a switch” and increase crude oil production or refining capacity.
Government policies have promoted scarcity, and now the President
bemoans the fact that prices, and consequently profits, are higher.
Hopefully, a segment of intelligent Americans will see through the plan
and vote Republican next November. What does that say about the
Administration’s ability to plan the energy economy in the US or the world? It says they are eminently successful.
Robert Lyman is an economist who spent 38 years working for the Canadian government.
Dr.
Jay Lehr is a Senior Policy Analyst with the International Climate
Science Coalition and former Science Director of The Heartland
Institute.
