Higher Prices? Ho Ho Ho, Yes

Joan Sammon05 Dec, 2021 4 Min Read
Simple arithmetic.

During a recent White House briefing, Energy Secretary Jennifer Granholm was asked by a reporter how much oil is consumed on a daily basis in the U.S. She was outlining Biden’s strategy to release of 50 million barrels of oil from the U.S. Strategic Reserves. By adding to the national supply of oil, goes their thinking, "adequate supply" can be maintained amid global shortages and increasing gas prices. However, there are a couple problems with their ill-conceived strategy.

Granholm was  unable to answer the reporter’s question, instead insisting that she would need to check the number. What everyone already knew is that the amount the administration is seeking to release from the U.S. Strategic Reserves represents about 2.6 days of added supply… hardly a game changer in a supply constrained market.

It will take a lot more than a press conference and a paltry 50 million barrels of oil to repair the economic damage brought upon America by this administration’s policies. Joe Biden’s policies have been devised to create oil and gas shortages, thus ensuring higher prices for consumers, and moving toward parity with wind and solar sources. It is a strategy the Left has been working on for years, and one they unleashed upon this country within hours of taking office. It is the reason America is now experiencing inflation, supply chain pressures, and economic malaise.

Dress warm this winter!

Charged with regulating the oil and gas industry, the depth of Granholm’s ignorance about how the industry she regulates works, is surpassed only by her lack of understanding of the economics of oil and gas. Up until the Biden administration's war on the oil and gas industry, the men and woman of the industry have achieved countless efficiencies through technological innovation that have repeatedly overcome industry challenges and difficult market conditions. Reliable, inexpensive energy after all is the backbone of any robust modern economy.

Granholm's jaw-flapping was further punctuated by her attempt to blame the oil and gas industry for supply shortages that her administration has worked hard to create. Asserting that oil and gas companies are simply trying to make lots of money, Granholm revealed the second problem with her strategy.

The supply and demand curve is one of the most basic concepts in economics. Almost immediately upon entering office, the administration and its surrogates began working to disassemble the infrastructure that until their arrival had delivered inexpensive energy to all corners of the country and overseas. Offering up "climate change" and institutional racism as the cornerstones of their destructive strategy, the administration has diligently worked to increase the price of oil and gas by attempting to remove the systems in place that inexpensively distribute oil and gas. Consider their impact in less than one year.

  • Stopping the XL pipeline project
    Immediately upon taking office the Biden administration took aim at the XL Pipeline. Using an executive order, Biden canceled its construction. The cancellation successfully impeded the distribution of more than 800,000 barrels of tar sands oil per day slated to be moved from Alberta, Canada to Steele City, Nebraska. The pipeline would have met with existing pipeline infrastructure to travel further south to oil refineries in the Gulf Coast. By reducing the flow, Biden has caused prices to increase.
  • Regulation of Methane Leaks
    Early last month, while in Glasgow, Scotland for the G20 Summit, the Biden administration announced new EPA rules that will purportedly reduce methane leaks. Intended to reach across the entire oil and gas industry, the policy will also cause prices to increase. After all, when a policy increases the cost of doing business that increase is passed through to consumers. The administration claims the leaks are a significant source of carbon emissions in the U.S. They have created a straw man to assert control over an industry that over the previous four years reduced emissions to below Paris Climate accord standards without any government interference.

Hope they don't fart.

But the administration went even further. They engaged multiple other agencies to harangue businesses outside the oil and gas industry. The Pipeline and Hazardous Materials Safety Administration -- part of Pete Buttigieg's crack Department of Transportation -- will push utilities and gas companies to "fix" leaks in natural gas distribution lines. The Department of Agriculture will be forcing farmers and ranchers to reduce methane emissions from manure, and the Department of Energy recently launched a program to force the adoption of heat pumps and induction stoves to reduce the need for natural gas inside homes and apartments. The Bureau of Land Management is planning to charge companies royalties for any gas that is vented or flared on public lands. One need not be an economist to understand that the heavy-handed regulatory maneuvering being undertaken by this administration will increase the price of oil and gas, and just about everything else.

  • Closing of Line 5 in Michigan
    Finally, two weeks ago, the administration confirmed it is considering shutting down a Michigan oil pipeline known as Line 5. In a battle whose first shot was fired on Nov.13, 2020, Michigan governor Gretchen Whitmer, a Democrat, took legal action against Canadian pipeline operator, Enbridge, revoking a 67-year old-easement for an approximately four mile underwater section of the pipeline that runs through the Straits of Mackinac and is part of Enbridge's Lakehead network of pipelines. It runs between Superior, Wisconsin and Sarnia, Ontario and carries about 23 million gallons of oil and natural gas liquids system-wide, daily. Line 5 moves about 540,000 barrels daily. According to the administration, it is exploring the possibility of terminating the Line 5 pipeline and is gathering data to determine if shutting down the line will cause a surge in fuel prices. Price increases are inevitable when supply is restricted.

So while Secretary Granholm touts the need for less expensive gas, perhaps the most obvious place to look is inside her own administration. Repeatedly devising plans, and launching initiatives intended to hamper the markets and diminish economic activity, will deliver higher prices to all. Merry Christmas America.

Joan Sammon is the founder of a boutique oil and gas advisory firm that develops strategies for an array of business & market challenges. As an ESG expert she explains the threat of ESG to her corporate clients.


See All

One comment on “Higher Prices? Ho Ho Ho, Yes”

  1. I’d just like to clarify one point. Regarding methane emissions, you say, “The administration claims the leaks are a significant source of carbon emissions in the U.S.”. The actual claim is that methane has a global warming potential (GWP) 28 times that of CO2. While that may or may not be true, methane emissions are trivial, and new EPA rules are overkill.

Leave a Reply

Your email address will not be published. Required fields are marked *