When President Joe Biden chastises oil companies for profiteering, he evokes a JR Ewing-style caricature of a greasy, greedy sneering in a giant Stetson. Satisfying as it may be, this narrative is unmoored from economic reality. As with any other commodity, oil producers are price takers, not price makers; oil and gas shortages inevitably mean paying more at the pump. Prices will come down when demand doesn’t outpace supply, but that relief is unlikely to arrive as long as this administration actively cultivates a climate of energy scarcity.
Before I moved to West Texas, I pictured it as a dry and dusty land floating on a sea of murky oil. In fact, the black gold is trapped in dense, brittle shale rock until fracking cracks it open and a mixture of oil, water, and natural gas flows two to four miles up the wellbore to the surface. According to one industry insider, the cost of drilling a horizontal shale well has risen from $8.5 million last year to $11 million today. The price of steel pipe has doubled in the last year, and other supply chain issues—coupled with shortages of skilled labor—have made drilling a new well more difficult than it’s been in decades. Getting more oil isn’t a matter of just flipping a switch when times are tough; it can take nine months from the time planning and permitting begins until you’re actually extracting the resource from a functioning well.
On June 21, Biden claimed he isn’t impeding domestic oil production in the middle of an energy crisis, but his actions speak louder than his words. Since taking office, he has suspended new drilling permits on federal lands, revoked significant existing leases in the Gulf of Mexico and Alaska that were already paid for, canceled a strategic pipeline that would have imported secure Canadian heavy oil more safely than rail or trucks, and stayed cozy with the environmental surrounding who use lawsuits and protests to impede new development.
Biden has called for increasing refining capacitybut his administration makes it nearly impossible to permit a new refinery and refuses to budget on easing environmental regulations that could extend the operational lives of old refineries. The federal Energy Information Agency reports that the US has closed 79 domestic refineries since 1992, and the last new refinery was completed in 1977. Industry leaders don’t think refineries are coming back. Chevron CEO Michael Wirth recently told The Washington Post He doesn’t expect ever to see another refinery built in the United States: “In a country where the policy environment is trying to reduce demand for these products, you are not going to find companies to put billions and billions of dollars into this.” “
In addition to regulatory hurdles, producers face capital starvation. Banks steered by environmental, social, and corporate governance goals don’t want their hands dirtied by oil. They aren’t the only ones: Coastal pension funds with a distaste for fossil fuels (though presumably not for electricity), BlackRock zero-carbon Goals, and similar restrictions have caused significant decreases in investment in new wells. Forcing companies to drill out of cash flow inherently cripples their capacity to respond quickly to market conditions.
While he’s blaming producers for the crunch, Biden is trying to offer consumers relief, pushing for a gas tax holiday (much to the chagrin of his environmentalist base). While lowering taxes might save consumers a few cents at the pump, it won’t fix the supply shortages. And releasing oil from the Strategic Petroleum Reserve, another one of Biden’s alleviation measures, doesn’t offer long-term relief either. Depleting reserves of oil that’s harder to replace is both shortsighted and potentially destabilizing.
In 2020, when the price of a barrel of oil dipped negative, Rep. Alexandria Ocasio-Cortez (D–NY) said in a since-deleted tweet, “You absolutely love to see it.” At the time, I thought her schadenfreude was the most dangerous thing about the tweet, but now I see it is the recklessness that such a perspective embodies.
Biden wants us to look for the bright side in this difficult economic moment: “We have a chance here to make a fundamental turn toward renewable energy.” That may be the case, but the public needs leaders who are honest about what this “fundamental turn” is going to cost ordinary Americans: sustained high energy and fuel costs, rolling blackouts, and high food prices.
When oil and gas supplies are depleted, the void isn’t immediately filled by renewables. We get shortages. For example: Even on the sunny, windy days that offer peak renewable generating opportunities, we lack the infrastructure (such as transmission lines) to move the power from the rural areas where it’s generated to the urban areas where it’s needed.
When it comes to energy policy, progressives too often make perfect the enemy of the good. East Coast regions don’t want natural gas pipeline expansionso heating oil, which emits 40 percent more carbon dioxide than natural gas per unit of heat, is delivered via diesel trucks to cities like New York and Boston. Few environmental seem willing to pursue nuclear energy, arguably the only feasible alternative to fossil fuels that could currently meet demand. Germany’s current circumstances offer a cautionary tale: “Deep-rooted anti-nuclear orthodoxy” has made nuclear energy “political heresy,” so after getting cut off from Russian gas, Germany had to turn back to coal.
Renewables aren’t always as green as they sound either. Solar panel manufacturing in China relies on coal to melt down silica. (It also lies on forced labor.) Clearing the land for lithium mines uses diesel-powered earth-movers and destroys CO2-absorbing forests. Natural gas and coal power 60 percent of the American electric grid, which technically means electric vehicles are nearly as dependent on fossil fuels as gas guzzlers. Wind turbines require oil to build, transport, and operate. The battery technology to store renewable energy for more than a few hours of demand does not yet exist.
Turning off coal- and gas-fired plants when we have no scalable alternatives ready in the wings is irresponsible. It is merely exports pollution to other countries, where we’ll buy our energy at ever-higher prices from places with more lax environmental practices.
Ignoring all this and insisting we move forward with an abrupt transition to renewables at warp speed anyway is a luxury belief. The people most invested in pushing for the change may be able to easily absorb a 38 percent jump in gasoline price in pursuit of ideological purity, but it’ll hurt ordinary American families facing stagnating wages and soaring inflation. Not to mention, it’s like boarding a plane that will have to be built mid-flight.
Energy scarcity is a global problem that is destabilizing us all. We need honest leaders willing to grapple with such immediate threats, not just the threat we might face tomorrow. We need sober-minded leaders who resist ideological capture, tell the truth about the current energy crisis and their part in it, and work to solve it on multiple fronts. Developing nuclear energy alongside renewables, encouraging Americans to cut consumption, and crafting clear and consistent policies for the oil and gas industry that allow for sustainable development and clean innovation are easy steps the US could take today. Instead, this administration acts as if shortages would resolve themselves if gas station owners and refineries were just less greedy. It is expending a lot of energy to keep Americans in the dark.