Education for the Power of Democracy | Whuff News

A customer pumps gas at an Exxon gas station.


Martha Lavandier/The Associated Press

If the Democrats lose next week’s election, one reason will be the energy prices going up. The lesson that this electoral defeat should take forward is that this is the result of their policies.

Consider President Biden’s rant on Friday about last week’s earnings reports from oil and gas companies. Six of the biggest “made $70 billion in profit in one quarter,” he said at the fundraiser. This “excess profit goes back to shareholders and their managers instead of going to lower prices at the pump.” A President who has done everything in his power to reduce US oil investment is now angry that he won.

Mr. Biden does not seem to believe that oil companies should be allowed to make a profit or pay less. “We must continue to make progress by getting energy companies to lower the cost of a gallon of gas to reflect what they are paying for a barrel of oil,” he said. Anything more is “excess” profit.

Keep in mind that the current oil profits are following further losses from the pandemic. As oil prices fell amid the shutdown, OPEC companies and nations scaled back investments and shut down wells. Demand for oil has rebounded much faster than supply, which has pushed up prices—and profits. That’s Econ 101.

Mr Biden is particularly disturbed that companies are returning money to shareholders instead of increasing supply. “You will have to use these record-breaking revenues to increase production and refining,” he said this month. But the progressive climate program and his Administration’s climate policies have encouraged the opposite.

Exxon Mobil lost a board battle in 2021 after big public pension funds and asset managers criticized it for investing too much in oil and making too little profit. Exxon and its board should assess “the possibility that demand for fossil fuels could decline rapidly in the coming decades,” BlackRock said.

The International Energy Agency warned only last week that “no one should think that Russian aggression can justify new oil and gas infrastructure in a world that wants to reach zero. [greenhouse-gas] emissions by 2050.” It added that “any new projects will face significant commercial risks” that could result in them failing to “recover their initial costs.”

No wonder oil companies are returning cash to shareholders rather than investing in production that takes decades to pay off. US shale drilling can produce rapid returns. But instead of drilling more wells, many producers are reducing their inventory of “drilled but not completed” wells.

The Energy Information Administration reported last week that the number of these wells has fallen to the lowest since December 2013, which means that production will finally be released in the Permian Basin. Challenges to permitting new drilling, as is the limited capacity of pipelines to transport natural gas produced alongside oil.

Major stockholders are also pressuring the oil giants to maintain “capital discipline”—that is, to spend less on production. Private US oil companies added 47 rigs in the third quarter while public firms added just one. Climate advocates want companies to return profits to shareholders or invest in green energy.

Continental Resources founder Harold Hamm said this month he is taking his company private to have “exploratory freedom.” “We have all felt the limit of being held publicly for the past few years, and at a time like this, when the world needs so much what we are producing, I have not been optimistic,” Mr. Hamm wrote to the staff.

Mr. Biden and other Democrats simply refuse to understand the economic consequences of their attack on America’s fossil fuels. They have come to believe that the climate is the problem and that the end of oil and gas is urgent. But that means higher prices, which they now blame on the very companies that want to go out of business. Economic logic won’t persuade them, but perhaps the way out of the ballot box will.

Journal Editorial Report: Debates may be providing momentum for GOP midterms. Image: Branden Eastwood/AFP/Getty Images

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Appeared on October 31, 2022, print edition.

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