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US NEWS 
By David Yager
June 17, 2022
Those who elect politicians hope they will govern well.
Those who run for public office hope they will govern forever.
This can be the only explanation for the peculiar relationship between the President of the United States and America’s oil industry at this time of global energy insecurity and economic turmoil.
Joe Biden has decided that one of his most important roles as America’s Commander-In-Chief is to pick a very public and increasingly vitriolic fight with the US oil industry in general and ExxonMobil in particular.
To understand what is going on, one must review the extensive political career of Biden himself.
Born in 1942, Biden will be 80 in November. When first elected as a Senator from Delaware in 1972, at 29 Biden was the sixth-youngest senator in US history. When he was sworn in, Biden was the oldest American President in US history. His only break from elected office was in 1988 when he unsuccessfully sought the Democratic presidential nomination. He served as Vice-President with Barack Obama for two terms.
In the past 50 years the US has been through significant changes in every aspect of domestic and international policy. Biden had already been in office for a year when OPEC sparked a global energy crisis and the US began withdrawing from a protracted war in Vietnam. Over two-thirds of Americans weren’t alive in 1973.
To succeed in politics this long, Biden’s positions on a multitude of policies have been “dynamic.” This is achieved by being more dedicated to what voters want to hear than any ideological foundation, doctrinaire belief, or the long-term interests of the nation beyond the next election.
When Biden sought the Presidential nomination in 2020, the majority of voters concerned about climate change supported the Democrats. This made climate change and the anti-oil movement a perfect wedge issue for Biden and the Democrats. In a world of energy plenty and low oil prices in 2020, putting another nail in the coffin of fossil fuels was a popular campaign issue.
Career campaigner Joe Biden delivered. Under his administration an accelerated energy transition was assured, and Americans would prosper because of it. There were few votes at risk for Democrats by promising to inflict more damage on an oil industry already on its knees after six years of low prices.
The day Biden was sworn in on January 20, 2021, he cancelled the Keystone XL pipeline yet again. KXL had achieved near mythical status among environmentalists as a symbol of everything wrong with carbon-based energy.
But the wheels started coming off the master plan in mid-2021 as oil prices began recovering. In American politics, the primary way voters pay attention to oil is the price at the gas pumps.
When Biden was campaigning in 2020, oil was cheap and had been for five years. In 2018 WTI averaged US$64.94, US$56.98 in 2019. Because of the pandemic lockdown, in 2020 the average price was only US$39.23. In December 2020 crude had crawled back to a modest US$47.02.
Trashing oil was popular. A narrative emerged that oil would never come back because the fossil fuel era was finished. A key Democrat campaign slogan was Build Back Better, a bold plan for driving the post-pandemic economic recovery and an exciting new clean energy future for America. It was billed as “The largest effort to combat climate change in American history.”
But as the economy reopened in 2021, so did oil demand. In the first six months of 2021 WTI averaged US$61.94. By the summer it was back above US$70. In October it was US$80, a price not seen since 2014.
Gasoline prices responded in kind. When Biden was seeking the presidency, the average US gasoline price was at or below US$2 a gallon. By the fall of 2021 it was up 65% to over US$3.30. In recent weeks it has passed through US$5.
Biden’s politically nimble administration responded immediately. The campaign message about restricting access to new oil and gas leases was replaced with allegations of “anti-competitive practices” in the marketplace. Secretary of Energy Jennifer Granholm started musing about reintroducing the US oil export ban to help lower domestic oil prices.
Within months of assuming office, the “largest effort to combat climate change in American history” had morphed into the quest for lower gasoline prices.
Granholm would later encourage US producers to resume drilling, claiming that there were no new barriers to oil and gas development. This about-face was startling. And the first of many.
By late October on his way to the COP 26 climate conference in Glasgow, Biden was publicly urging OPEC, particularly Saudi Arabia, to increase output to moderate US fuel prices.
When running for President Biden had previously stated he would make the Saudis “…pay the price, and make them in fact the pariah that they are.” Of the Saudi royal family he said there is, “little social redeeming value in the present government in Saudi Arabia.”
Biden currently plans to visit that country to improve diplomatic relations.
Seeking more oil from anywhere but Canada, Washington revisited sanctions against Iran to get more of their oil into the market. This further polarized the Saudis. Then Venezuela was asked to produce more oil. Venezuelan oil had been boycotted because of its appalling human right record.
When Russia invaded Ukraine in February, oil jumped again. Gasoline prices followed. Now the White House blamed Vladmir Putin for rising American fuel prices. At one point Biden stated, “We’ve never seen anything like Putin’s tax on food and gas.”
The latest target has been “big corporations” making record profits at the expense of consumers. On June 10 Biden singled out ExxonMobil for special attention, accusing oil companies of intentionally driving up prices.
“We are going to make sure everyone knows Exxon’s profits…Exxon made more money than God this year…One thing I want to say about oil companies, talk about how they have 9,000 permits to drilling. They’re not drilling. Why aren’t they drilling? Cause they make more money not producing more oil. The price goes up, number one, and number two the reason they are not drilling is they are buying back their own stock.”
In a direct broadside he stated, “Exxon, start investing and start paying your taxes.”
On June 14, the White House released a letter from Biden to Darren Woods, Exxon’s CEO. It started, “I am writing to you about the high prices our fellow Americans are paying at the pump, and how we can all play a role in addressing them.”
While acknowledging that Russia was affecting oil prices, the other cause was “an unprecedented disconnect between the high price of oil and the price of gas.”
The problem now was excessive profits in refining due to reduced capacity. On June 15 Biden wrote to the seven largest refiners and trashed them publicly. “The crunch that families are facing deserves immediate action. Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.” He said refining profits are “currently at their highest levels ever recorded.”
The message was if refiners didn’t act soon, Washington would enact undefined “emergency powers” to force them to increase output. Forbes commentator David Blackmon called this “possibly his most irrational act yet,” writing Biden, “… lashed out at oil refiners for shutting down too much refining capacity in recent years. Thus, the President whose administration has been actively trying to limit the domestic oil industry’s ability to get its business done is now so desperate to shift blame for high gasoline prices that he resorts to the pretense of being disappointed that that has been happening.”
On TV later that day, Energy Secretary Granholm urged refiners to quickly produce more gasoline and diesel fuel, but not for long. She said, “…today we need that supply increased. Of course, in five or ten years – in the immediate – we are also pressing on the accelerator to move towards clean energy.”
ExxonMobil responded stating, “…government can promote investment through clear and consistent policy that supports U.S. resource development.”
The US has also authorized releasing up to 1 million barrels per day from its Strategic Petroleum Reserve, the world’s largest, to help temper prices. But what is more strategic? Price or supply? Time will tell whether this response at this time was appropriate.
The political assault on American oil by the Democrats is not new. They have been at it in various ways since Barack Obama won the Democratic nomination in 2008 and replaced the Republicans in the White House.
They have simply changed the nature of the crime.
Until last summer it was too much oil creating too many emissions which are destructive to the environment.
Today it is not enough oil resulting in higher prices which is destructive to the economy.
The unspoken issue is November’s mid-term elections. Whatever they think or say about climate change, Americans hate paying more for gasoline.
To career politicians like Biden, that is the definition of a true crisis.
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The United States could never have become a global economic and military powerhouse without the geological blessing of massive quantities of oil and natural gas. While there is lots of petroleum in lots of places, what America also brought to the global industry was money, entrepreneurship, ingenuity, risk taking, engineering, equipment, services, manufacturing and distribution.
The first oil discovery in the US was at Titusville, Pennsylvania in 1859. Oil was found in New York in 1865. By 1874 John D. Rockefeller was buying kerosene producers and building Standard Oil. Oil was discovered in Kansas in 1892 and Texas in 1894. The famous Spindletop blowout occurred in 1901.
Drillers struck oil in Colorado in 1862, California in 1880, and Louisiana in 1906. America was the largest oil producer in the world for decades. As important, the US also became the largest supplier of almost everything else. Most of the oil production in the western world was developed with some component of American capital, knowledge, equipment, personnel and technology.
The geopolitical importance of oil became apparent during the first half of the 20th century when international wars were fought with modern mechanized armies, navies and air forces. Everything ran on petroleum. One of the reasons that the US was victorious in Europe and the South Pacific in the Second World War was unlimited supplies of petroleum. Germany and Japan had none.
Oil and American military power were one in the same. These posters from WWII indicate what the relationship between the US petroleum industry and the US people used to be.
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This was followed by books that highlighted how petroleum helped America win the wars in Europe and the South Pacific from the air.
But by the 21st century, oil had become so ubiquitous that few cared where it came from or why they needed it. The narrative of praising American oil, or treating petroleum as an asset instead of a liability, ended years ago.
This is regrettable. The greatest recent contribution to stimulating the world economy through reduced energy prices was America’s light tight oil boom which increased production so much it affected global prices. From 2008 to 2020 new light crude production from the Bakken, Permian and Eagle Ford fields added 8 million barrels a day.
By 2015 this production helped collapse world oil prices and set the stage for seven years of industry contraction and false energy economics.
Oil was cheap. It was everywhere. Through ESG investing, divestment and the highly-publicized energy transition, the world could interfere with capital flows and promote substitute sources that simply didn’t work.
Based on Biden’s recent attacks on US oil, the message is, “What have you done for us lately?”
The other fossil fuel with which enterprising Americans changed the world was the commercial extraction of shale gas. Enormous quantities of cheap gas from plays like Barnett, Haynesville and Marcellus turned North American gas markets upside down. This provided Canada and the US with a significant energy cost advantage compared to other parts of the world. And by 2021, the US was world’s third largest LNG exporter.
This came in handy starting last summer when Europe learned the hard way that its aggressive energy transition had overlooked the continued need for natural gas. The enormous value of US natural gas became even clearer when Russia invaded Ukraine and turned gas into a geopolitical weapon.
The role of oil and gas in the economic success and technological advancement of America – and its collateral benefit to the rest of the world – is one of the most important but least acknowledged factors in energy history.
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It is becoming obvious to anyone not directly involved in party politics that the acceptable 21st century definition of good government is in need of serious review and repair.
America’s Pew Research Centre tracks the percentage of people who “trust the government to do what is right just about always/most of the time”. Pew reports that “Public trust in government (is) near historic lows” falling from a high of 77% in 1964 to 20% or less for the past ten years.
While self interest has always been a hallmark of politics, disillusionment is rising because more people believe that today’s politics is more about politicians than the people they purport to represent.
The policies of Biden and the Democrats regarding climate and energy were conceived in an economic environment that no longer exists and may never be repeated.
Thanks to American oil and gas, global energy prices were unrealistically low for an extended period from 2015 to 2021. In the years leading up to the Biden presidency, America and the world enjoyed all the economic benefits of cheap energy without understanding where it was coming from, or that it might not continue.
Meanwhile, the climate emergency phenomenon grew to the point that not only were fossil fuels no longer required, but the world would be a better place if declining reserves were not replaced.
In the past six months many governments elected on climate change platforms have pivoted to put energy cost and security ahead of emission reductions.
But the behavior of the Biden administration running the world’s most important oil and gas producing nation is an astonishing spectacle.
The only path to lower oil prices is more oil. However, the chosen path in America is to attack the solution, not the problem.
If the Democrats are clobbered in the November mid-term elections, they deserve it.
David Yager is an oil service executive, oil and gas writer, energy policy analyst, and author of From Miracle to Menace – Alberta, A Carbon Story. Find the book to www.miracletomenace.ca.
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