OPEC Slashes Production: Dems, Your Wallet Hardest Hit
The Organization of Petroleum Exporting Countries, OPEC+, has agreed to a major cut in oil production. According to CNN, the supercartel -- which includes the 13 member nations of OPEC as well as a loose grouping of ten or eleven other oil producing states like Russia, Mexico, and Kazakhstan -- will slash production by "2 million barrels per day, the biggest cut since the start of the pandemic," a reduction "equivalent to about 2 percent of global oil demand."
Always concerned about the fate of their beloved Democrats, the CNN report makes it a point to mention that this "threatens to push gasoline prices higher just weeks before U.S. midterm elections." No kidding. Of course, for our captured commentariat, the disruption this might cause to their political narrative is a bigger deal than the disruption to people's lives. Gas prices have come down since their summer peak, but they are still outrageously high compared to just a couple of years ago. Americans are already struggling to fuel their cars and handle the soaring price of groceries and other necessities that have been inflated by soaring gas prices.
Still, they're not wrong. Despite some frankly terrible candidate selections on the GOP side, widespread dissatisfaction with Democratic policies have made several midterm races closer than they have any right to be. Oil and gasoline prices trending upwards again, especially just as heating season is getting underway, is likely to tip the balance further to the right.
No wonder Politico reports that Democrats are "seething" at the vote, and are frustrated that the Biden administration's attempts to influence OPEC decision making -- including a presidential visit to Saudi Arabia in July -- were all for naught. While visiting Riyadh, Biden's charm-offensive infamously included a fist-bump for the cameras with Crown Prince Mohammed bin Salman to kick-off their meeting. Maybe he would have gotten better results if Biden hadn't pledged during his presidential campaign to make the Kingdom a "pariah" state. Wanna bet the Crown Prince took exception to those remarks?
Hoping to get out ahead of GOP point-scoring, Rep. Tom Malinowski (D-N.J.), put out a statement saying, “I hope that Republicans will join me in supporting [economic retaliation] rather than wishing high gas prices on the American people so they win an election."
Nice try, but the Democrats are responsible for this mess, and they're going to have to live with the consequences. If they weren't so focused on killing Keystone XL (the original sin of this administration's energy and economic policies); on banning oil and gas leases (and then half-heartedlyreintroducing them); on pushing ESG on their big bank cronies at every turn; on backing the closure of U.S. oil refineries, or their conversion into BioFuel processing plants; all while appointing devout Green New Dealers to the cabinet; and generally waging war on the resource sector, we wouldn't be in anything like the mess we're in.
[Our] domestic oil industry enriches people — and states — Democrats don’t like." Money going to Saudis, Russians or Venezuelans is one thing, but money going to Texans, Oklahomans or South Dakotans is another. Truth is, red states and their inhabitants rank higher on the administration’s enemies list than do shady foreign nations.
Oil From U.S. Strategic Reserve Heads for Europe Amid Global Supply Crunch
A cargo of crude from the U.S. Strategic Petroleum Reserve departed a Texas port bound for Europe, a signal of increasing oil-market disarray as refiners shun Russian supplies and prices surge. The rare export of strategic U.S. barrels is evidence of the ever-widening search for crude to replace Russian cargoes seven weeks after President Vladimir Putin’s invasion of Ukraine triggered international revulsion and sanctions.
A tanker known as the Advantage Spring loaded low-sulfur crude originally pumped from the strategic reserve caverns in Southwest Louisiana at a port in Nederland, Texas earlier this month, according to a person familiar with the matter.
President Joe Biden, along with several allies, recently offered a portion of their strategic reserves for sale to help alleviate some of the supply pinch associated with the escalating war in Ukraine. TotalEnergies didn’t respond to a request for comment.
First he killed the golden goose of American energy production. Now, he's selling off the carcass for parts.
Making a Bad Situation Worse
The Left has an unhealthy tendency to treat the economy -- a complex, organic system of human interaction -- as if it were a machine they can easily manipulate by means of a clever regulation or three. We caught a glimpse of this in the early months of the pandemic, when talk about "shutting down" and then "prudently restarting" the economy (once Donald Trump was safely out of office, of course) was ubiquitous in respectable leftist discourse. In fact, the economy never stopped running, lockdown or no. That's because it isn't like a computer which can be flipped off and on again. The economy is more like a human body, and when you seriously disrupt the function of a body, the consequences are dire.
Ordinary people are feeling the economic consequences of those lockdown disruptions right now in the form of soaring inflation and elevated prices for gasoline, consumer goods, and services. And despite their role in bringing these things about -- pumping out trillions of dollars of funny money long after anyone thought it made sense and declaring war on the resource sector as worldwide energy prices were exploding -- the Left is now openly pondering further destructive interventions with the aim of getting things under control.
We've already reported on the White House's cynical decision to -- once again -- tap into the Strategic Petroleum Reserve, leaving it at its lowest level since 1984 and almost exclusively to combat high gasoline prices. Well, as the Daily Caller reports, things haven't played out exactly as the president hoped:
Oil prices shot up Monday despite President Joe Biden’s plan to curb gasoline prices by releasing a million barrels of emergency oil reserves daily. The Brent crude index, the global oil benchmark, increased to $108.07 per barrel Monday morning, surging more than 3.1 percent overnight. The U.S. WTI index skyrocketed more than 3.4 percent past $103 per barrel Monday.
In response to the White House's announcement, Institute for Energy Research President Tom Pyle said “It’s not a ‘strategic price reserve.’ It was never intended for this and it won’t do anything [for prices]." Thus far, he has been proven exactly right.
But perhaps even more concerning is the increasing openness of prominent Leftists like Elizabeth Warren and Bernie Sanders to attempt to right the ship by enacting 1970s-style price controls. Andy Kessler of the Wall Street Journal compiles several quotes suggesting that even Joe Biden is considering going down that road. He then explains why this would be disastrous:
Prices set by producers are signals, and consumers whisper feedback billions of times a day by buying or not buying products. Mess with prices and the economy has no guide. The Soviets instituted price controls on everything from subsidized “red bread” to meat, often resulting in empty shelves. President Franklin D. Roosevelt’s National Recovery Agency fixed prices, prolonging the Depression, all in the name of “fair competition.” Watch for the resurrection of that phrase to rationalize price controls.
In 1971 President Richard Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.” We got new government entities: a Pay Board and a Price Commission. Americans paid for this mistake for another decade. Farmers drowned chickens rather than send them to market. Store shelves emptied. Price controls contributed to long lines at gasoline stations in 1973 during the Arab oil embargo. It’s pretty simple: When you freeze prices too low, producers stop producing. Price controls don’t work. Never have, never will.
Which is to say, the cures these people are proposing are worse than the disease. Even so, look for these hairbrained schemes to multiply until they're out of power. Unfortunately, they are sure to have knock-on effects for years to come, and we are going to be the ones who suffer for it.
Biden to Tap Strategic Petroleum Reserve Yet Again
Back in November, Joe Biden released 50 million barrels of oil from the Strategic Petroleum Reserve in the hopes of reducing the inflated price of gasoline his anti-oil and anti-gas policies were responsible for. Americans were getting testy, you see, about elevated gas prices and the rising cost of goods and services which they brought about. And that frustration was eating into the president's approval rating and hurting the Democrats, with the midterm elections just a year away. But the plan failed. Gas prices weren't appreciably affected, the cost of living remained high, and discontent spread.
Luckily the White House has come up with a plan to fix all their problems: tap into the Strategic Petroleum Reserve. Again. Only this time the plan is to really tap it. Instead of a mere 50 million barrels, Team Biden has announced a plan to release 180 million barrels over the course of three months, by far the biggest drawdown of the reserve since its creation in 1975. Moreover, this release will leave the reserve with fewer than 400 million barrels, their lowest level since 1984.
Will it work? It didn't last time. That's because, as the Wall Street Journal editorial board explains, "the oil will need to be replaced, which will push up future demand." They continue:
Markets don’t respond only to short-term demand and supply fluctuations. They also take into account long-term expectations and policy signals. And the Administration continues to signal that its goal is to bankrupt oil and gas producers. But before shooting them, Mr. Biden wants their political help.
The war in the Ukraine might be responsible for the recent price spikes. But Biden's war on the oil and gas industry set a higher baseline for prices to take off and have made it nearly impossible for the market to recover.
"I did that!"
It is also worth noting that this isn't really what the Strategic Petroleum Reserve is for. Its purpose is to defend against the kind of national crisis they had in the 1970s, when the fact that America imported more than 80 percent of our oil proved disastrous when the OPEC declared an oil embargo on the western nations that had supported Israel during the Yom Kippur War. Oil shortages and rationing followed, creating not just a national energy crisis but a potential national security crisis as well. The Strategic Petroleum Reserve was created to establish a cushion for just such a situation.
Thankfully, our present situation isn't like that at all, because we've developed our own natural-resource industry; the U.S. was a net energy exporter as recently as 2019. During the Trump administration we became less reliant on foreign dictators than ever. But Biden has worked hard to pull that all down, and now he's spending down the capital better leaders worked hard to build up. Thanks, Joe.