Is Biden the Cause for High Gas Prices - My Thoughts

 

A friend asked me an interesting question:

Can you tell me what you think is the real cause for the increase in gas prices? I am hearing that it’s not due to Biden stopping the XL pipeline and that he never closed any other pipelines. Do you think that Biden and his new green deal goons convinced the oil companies to artificially increase prices in order to force people to buy EVs (electric vehicles)?

 Good question!

We have to start with the context.

First of all. Pre-COVID, we were not energy independent. With COVID, our demand dropped dramatically. As a matter of fact, we became “energy independent”, but ONLY because our demand dropped below our production. Before you research this and find out that our demand dropped by 12% but our production dropped by 18% and you want to argue with me, also consider that our exports dropped dramatically. I can't quote the percentage, but the amount offset the difference between supply and demand making us energy independent. Trump did not make us energy independent, COVID did.

Post-COVID, our energy demand has increased and our production has not increased at the same rate to where we are no longer energy independent.

Second point of context, prices are mainly set by supply and demand, BUT it is also set on “perception of value”. When scarcity is “perceived”, prices go up. For example, when a main pipeline had to be shutdown because of a computer issue (whether it was a hack, virus, or glitch) the price shot up long before any effect of the shutdown could be felt in reality. The truth be told, the pipelines get shutdown all the time for different reasons, but because they are never publicized, they have no effect on the price. Fear drove the price up, not any actual supply issues.

Third point of context, oil production (oil fields) takes approximately 5.5 years to first production (from start) and 17 years to reach peak production.

 

With some of the context in place, we can look at why prices have gone up.

 

I would say that Biden is NOT to blame for prices from the supply/demand side of things. Shutting down the XL pipeline did not change the supply at all. The pipeline is not even built yet. He shutdown the building of it. Second, the oil the pipeline was transporting, once refined, was not to be sold here in the US anyway. It was destined for other countries. We still receive the oil by other transports, but we burn more fuel getting it to the refineries. He did attempt to shut down a primary active pipeline (I think in Michigan), but it was fought and Biden lost.

From the “perception” angle, Biden gets a lot of blame. His messaging on “killing the fossil fuel industry” has driven prices up. Not just the messaging, but because of circumstances on the global political environment. His original messaging drove prices up some. But with the threat of war looming early on, prices continued to climb. This “perception” could have been denounced if he had allowed growth in oil production. More drilling, more permits, etc. As I stated earlier, 5.5 years to reach first production, but the “perception” of this move would abate the “perception” caused by the talk of war. Demand was increasing which will naturally cause an increase in prices, but the perception of tremendous supply issues due to the war could have been quelled, but were not, driving prices up far more rapidly.

Biden is not responsible for world prices increasing, but the world prices did not shoot up until the war was becoming real.

With the war now full on, and Putin threatening to pull oil supplies from the rest of the world, this is driving prices up further. The world does look to the US to protect them in these type of situations, but Biden’s messaging is so poor that confidence in the US’s ability to provide such protection is non-existent. Anther “perception” driving prices up.

Now saying all that, Biden in indeed responsible for FUTURE price increases. By not allowing development of new sources of oil and gas, as our demand continues to grow, our supply will not change. The difference between our supply and demand will continue to get wider causing increases in prices.

At every turn, Biden refuses to allow our ability to produce more oil and gas to manifest. Even Elon Musk acknowledges that we need more oil production due to the world economic/environmental situation.

I am all about renewable energy, but I am smart enough to know we are nowhere near ready for a major transition. Once the infrastructure is in place, perhaps we can begin moving in that direction, but we’re not even close at this point.

I plan to own an EV soon, but I also recognize some of the shortfalls we currently face. I will also own a gasoline powered vehicle at least as long as these shortfalls exist. Only 1% of vehicles on the road are EVs, so setting goals of no gasoline powered vehicles being built by 2030 is ridiculous, in my opinion. While it might be an honorable goal, California has had rolling blackouts due to energy demands just for air conditioning. If their infrastructure cannot support the current conditions, how would they support the added load of EV charging?

Biden needs to show the world that we are not just sitting back. If he would go full on at new oil production, pipeline building, etc., the “perception” price increases would go away and only the supply/demand increases would drive the price. But in the future, the prices would come back down as new oil production starts making a difference in the supply.