Understanding the Energy Malfeasance Gripping the United States

by | Aug 4, 2022 |

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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 Administrations ability to plan the energy economy in the US or the world? It says they are eminently successful.

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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.

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