Oil prices continued to fluctuate with record volatility this week, sending consumers’ gasoline bills skyrocketing across the country. The national average gas price hit $4.35 per gallon on Thursday as gasoline prices traded above $116 a barrel. Now, facing historic inflation and a geopolitical crisis, the Biden administration is calling on oil and gas companies to increase supply and bring down prices.
But even before Russia invaded Ukraine and sent shockwaves through the global energy market, domestic producers’ ability to meet demand was hobbled by the administration’s decisions to ban federal land leasing, cancel the Keystone XL pipeline, and increase the social cost of carbon.
On Wednesday, speaking to oil and gas executives at CERAWeek, Energy Secretary Jennifer Granholm called on companies to increase fossil fuel production:
“We are in an emergency, and we have to responsibly increase short-term supply where we can right now to stabilize the market and minimize harm to American families.”
Last November, a Bloomberg reporter asked Secretary Granholm how she planned to increase domestic oil and gas production to combat rising prices. Granholm apparently found the question “hilarious”:
“[Laughs]. Oh my gosh. That is hilarious. Would that I have a magic wand.”
This is no longer a laughing matter.
According to Energy Information Association data, last week, U.S. oil inventories fell by nearly four times the volume analysts had expected. Excluding oil stored in the Strategic Petroleum Reserve – which the Biden administration has already tapped twice – inventories currently sit at 411.6 million barrels, 13 percent below the five-year average. EIA data shows that production remained unchanged compared to the previous week.
With oil over $100 a barrel and climbing, it seems intuitive that oil and gas companies would pursue the responsible – and potentially lucrative – strategy of increasing output. Unfortunately, increasing production on a dime is costly and technically challenging. Prior to drilling, companies must complete geological surveys, conduct thorough mapping, build out infrastructure, and meet regulatory requirements. Diligence at the pre-production stage is especially important if production companies intend to minimize negative environmental and community impacts.
Turning an active lease to an active production site takes time and capital, and the Biden administration has given companies no reason to think the administration will support the domestic oil and gas industry in the long term, or even the medium term. Last week, White House spokesperson Jen Psaki reiterated the administration’s position on the future of domestic oil and gas:
“Our view on drilling over the long term is different. Overall, what we need to do here is reduce our dependence on oil. […] And I think what we’re all going through now in this discussion of banning oil imports and the volatility in the global oil markets is a reminder of that.”
On one hand, the administration sees no place for fossil fuels in America’s energy mix. On the other hand, the administration apparently can’t navigate the country out of the current crisis without American fossil fuel companies. This disingenuous rhetoric holds back the investment and production that the Biden administration itself acknowledges is essential to relieving consumers’ pain at the pump.
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