Gas has become a political tool Republicans are using to condemn the Biden administration’s climate policies. Pointing the finger at the president is a convenient pretext because they represent the interests of fossil fuel companies.
But media coverage of gas prices oscillates between incomplete, misleading and downright false. The truth is that gas prices have little to do with White House decisions and there are few quick fixes.
Consumers, especially the most vulnerable, need relief. But it won’t come from more drilling, as many politicians demand. In fact, more drilling would keep us at the mercy of future oil shocks. And it would tie our economic and environmental health to an industry with a long history of volatility and corporate greed.
Let’s break it down.
Citing the economics of supply and demand, political pundits are calling on Biden to increase the supply of oil to the United States, i.e. drill more. We need more gas than we have, according to logic. The prices were raised. If supply increases to meet demand, prices will fall.
This argument misses essential facts. First, Biden is not blocking the flow of American oil. In fact, he turned on the tap more than Trump. The current administration issued more than 3,500 drilling permits in 2020 alone; that’s a third more than in Trump’s first year. And under Biden, US oil production has fallen from 9.7 million barrels per day to 11.6 million.
Yet oil and gas companies remain on the sidelines of new drilling projects. Currently, 4,400 approved and drilled wells have yet to produce oil. Oil and gas executives show no signs of increasing production.
Oil executives themselves have revealed the reason for their inaction: profits. The oil and gas industry is seeing record cash flow. In the first quarter of 2022, the five largest fossil fuel companies posted their highest profits in more than a decade. Last year, four big companies (Shell, BP, Chevron and Exxon) earned $75 billion.
Their investors are demanding more from this windfall. So instead of investing record profits in more drilling infrastructure, oil companies are returning money to investors through share buybacks and payouts. In a March poll, 59% of oil executives admitted that investor pressure for profit, not government regulation, is the real reason they don’t drill.
But the chatter about drilling misses the mark. And it’s not like we usually use a lot of Russian oil that we are missing now. Of all the petroleum products used in the United States over the past decade, only 2% were Russian imports. So how do Russian sanctions affect US gas prices?
Oil is a global market, which means that prices are set by global supply and demand. The market could be rocked by tons of factors beyond the control of the United States. Factors such as natural disasters near production centers, the whims of oil-producing states, and war. Such events create uncertainty about the future of supply and demand, which leads to more volatile prices. On top of that, speculators and their AI fleet regularly bet on the future of the oil market. When prices go up, investors see dollar signs – and the more money they put in, the higher the prices go.
In 2021, the United States exported more oil than it imported for the first time. Our crude oil production is at record highs. Yet the price we pay for oil has still fluctuated wildly in recent years. We are still vulnerable to oil price shocks.
Excerpt: “More drilling will not reduce the gas
Price – Price Control and the Will of Renewables’.
Courtesy of Commondreams.org