This is a peculiar time in U.S. energy policy history. The Biden administration’s newfound more-oil-and-gas-now approach is being hoisted upon a web of oppositely intended government intervention. The result? A a slew of ad hoc, contradictory commands and controls in contrast to a stable, predictable, sustainable free-market framework for oil, natural gas, coal, and electricity.
The Biden administration’s war against fossil fuels, a reversal from the Trump presidency, came home to roost before Russia’s invasion of Ukraine—and has worsened after. With elections ahead, and voters aware of Biden’s “we are going to get rid of fossil fuels” philosophy, the party in power has gone two-faced, not unlike Al Gore’s gasoline pledge in 2000 and Barack Obama’s Cushing oil speech in 2012.
It’s energy policy whiplash. On a dime, Biden’s keep-it-in-the-ground became release-it-from-the-ground. “We are on a war footing—an emergency,” DOE Secretary Jennifer Granholm told CERAWeek one month ago. “And that means you producing more right now, where and if you can.” Yet Granholm previously lectured the oil and gas executives about how their “dying” industry had to “diversify” into politically correct energies.
Oil and Gas, Please
President Biden’s quick-fix policy program is led by:
- Crude-oil releases from the Strategic Petroleum Reserve (SPR) of approximately one million daily barrels for six months, covering the driving season.
- A “Marshall Plan” of LNG exports from the U.S. to Europe, enhancing domestic natural gas production.
There is also talk about reducing the ethanol mandate and reducing the federal motor fuel tax to aid motorists. Even the new greenhouse gas policy for natural gas pipelines at the Federal Energy Regulatory Commission is being reconsidered in the current emergency. Finally, on the international oil side, relaxing sanctions against Venezuela and Iran has been floated to increase world oil supplies.
At the nonfederal level, four states (Maryland, Connecticut, New York, and Georgia) have suspended their gasoline taxes. California Governor Gavin Newson plans to rebate $400 to every car registrant in the state. “Elected officials in more than 20 states have proposed gas tax holidays of anywhere from one month to two years,” one summary noted, “which could save consumers 25 to 50 cents a gallon, or more.”
Anti-Oil and Anti-Gas Policies
Make no mistake—behind the fig leaf of oil-and-gas consumerism is an assault on fossil fuels. Oil and gas leasing in the Gulf of Mexico is stymied, and there remains no permit to resurrect the Canada-to-U.S. leg (Phase IV) of the Keystone XL pipeline.
Biden’s all-of-government approach against fossil fuels includes using Waters of the United States rules to red-tape hydrocarbon infrastructure to death. Meanwhile, a controversy rages about injecting the U.S. Department of Treasury into energy financing on the side of politically correct energies.
While LNG exports are pragmatically promoted, LNG-by-rail is being blocked by the U.S. Department of Transportation. Jones Act waivers to aid LNG are off the table. FERC is blocking new interstate gas transmission to the Northeast. And instead of invoking the Defense Production Act to reverse anti-oil and gas policies and bottlenecks, Biden is using this Cold War law to accelerate mining critical inputs for electric vehicle production.
Build Back Better, slimmed down, is all about more favors for electric vehicles, industrial wind turbines, and solar arrays. Short of that, a series of anti-free market energy spending and controls is contained in Biden’s proposed Fiscal-year 2023 budget.
Thank goodness for small favors. The party in power is not calling for synthetic oil and gas (synfuels), special subsidies for high-cost oil production, price controls, and rationing. Such palliatives marked the ad hoc energy policies of prior emergencies.
The consistency and simplicity of the free market beckons, in contrast to see-a-problem, pass-a-law. Well-defined private property rights, voluntary exchange without government mandates and exhortation, and the rule of law against force or fraud are necessary. The ancillary framework includes sound money and low, equitable taxation. Government is neutral and demoted; civil society thrives.
Prudency and consumer sovereignty point toward a policy reversal toward the best energies and away from the worst. The economically correct must replace the politically correct. At the same time, energy spending and tax subsidies can decline as a step toward fiscal sanity in a time of unbridled budget deficits.
“If the President really wanted to reduce oil prices, he would give a speech announcing a complete halt to his Administration’s war on the U.S. industry,” the Wall Street Journal recently editorialized. “Prices might drop $20 per barrel.” This would be only the beginning of an energy renaissance. Free-market reform in the electricity sector would replace unreliable with reliable generation, offering cost-savings and freeing the landscape from a panoply of unneeded open-air machinery.
The next generation of politicians at all levels of government has a big job to do, but one of subtraction and simplification, not addition and complication. It is time for citizen voters to put new leaders in place for an energy transition to consumer-driven, taxpayer-neutral energies and away from dilute, intermittent, parasitic substitutes.