OPINION:
Oil and gas are Russia’s largest exports and account for a substantial portion of its budget. Russia exports about 5 million barrels of oil per day and supplies Europe with 40% of its natural gas consumption. High oil prices are of great benefit to Russia and a killer for the economies of the non-oil and gas-rich countries.
It is straightforward supply and demand. Increase supply, the price of oil and gas drops for U.S. and European consumers, and the amount of revenue Russian President Vladimir Putin receives for his oil and gas drops, limiting his options. Restrict the supply of oil and gas, the price rises, consumers are hurt, and Mr. Putin’s Russia benefits from the higher oil revenues (as does oil-rich Venezuela run by the dictator Nicolas Maduro). President Biden has taken many measures to restrict U.S. oil and gas production — hurting the American people and benefitting Mr. Putin and Mr. Maduro.
Two years ago, the U.S. was the world’s largest oil and gas producer, making the U.S. self-sufficient in energy and a major exporter. As a result of Mr. Biden’s war on oil and gas production, the U.S. is now an oil importer (including from Russia). Depending on the local market, gasoline prices have roughly doubled — costing the average family about $750 more per year to fill up the car.
There is one person responsible for bleeding the American consumer in the form of higher energy prices and making economic life easy for the thug Putin — and that is Mr. Biden. Mr. Biden seems to have given no thought (unless he is totally mean-spirited — or on the take) to the consequences of yanking oil pipeline permits, making it off-limits for much new and necessary oil and gas drilling, imposing costly and at times prohibitive new regulations on both existing and proposed production. Oil and gas production declines in each well over time, which is why it is necessary to constantly drill new wells to just keep up with existing production levels, let alone increase production.
Last week, Mr. Biden said his administration will do anything possible to increase oil and gas production to bring prices down. Yet, when he was saying this, his Justice Department and his various regulatory agencies were in court trying to prohibit new domestic production in many places. The man speaks with a forked tongue.
This past week, I spoke with a Texas friend who is a significant oil and gas producer. I asked him how long it would take his company to return to full production if Mr. Biden suddenly reversed course and let the oil and gas industry go full out. The bad news is that it will take one to two years or perhaps more. There are rigs in storage, but it takes trained people to clean them up and get them ready to operate – and many of the previous skilled oil field workers who know how to do those tasks have gone elsewhere. There is now a shortage of infrastructure — including pipelines and trucks — and again, trained workers to operate them. The costs of fracking, sand and steel have soared, and supplies are limited, primarily due to environmental regulations. And banks have been told by the administration to restrict lending to oil and gas producers.
Mr. Biden has said that the oil price hikes are temporary, and the prices will soon fall — but in fact, the only way that is going to happen is if the country goes into recession and demand substantially drops. Without a recession, prices will remain high until Mr. Biden removes the impediments to producing on more land and offshore, and allows drilling rigs to go back into production without months or years of new environmental studies and regulations.
Many European countries are in far worse shape than the U.S. because they gave into environmental crazies and shut down oil, gas, coal and nuclear plants before they had replacements — thus becoming more dependent on Russian oil and gas. Under the Trump administration, liquefied natural gas exports to Europe were greatly increasing. The fact is the U.S. has sufficient reserves to fully offset Russian natural gas — but, as noted, Mr. Biden is doing his best to kill the U.S. fossil fuel industry, including natural gas.
It is ironic that a new, credible study has just been published, which shows that the fully-embedded carbon-emission costs of producing solar or wind power are greater than those of natural gas. To repeat, the amount of CO2 expended in obtaining (including mining rare earths and other metals), fabricating, and then operating solar or wind farms is worse for the environment than clean-burning natural gas.
Back in 2014, we and others published evidence that major Russian oil companies were funneling monies to U.S. environmental groups, allied with the Democrat party, to undermine U.S. oil and gas drilling. Are Mr. Biden (through his son Hunter) and other influential Democrats still on the take from Russia? How else to explain such destructive behavior?
• Richard W. Rahn is chair of the Institute for Global Economic Growth and MCon LLC.
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