Enough of one that they have decided it’s good policy, and better political optics, to bully gas station owners over how much they charge at the pump. The president’s Twitter team published this gem over the long holiday weekend:
My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril.
Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.
Setting aside the notion that an American president feels the need to harangue the franchise owner on the corner…the economic illiteracy on display in Mr. Biden’s tweet is inexcusable.
It would be generous and kind to blame the communications staff for this. But the buck stops with Joe, so the blame is all his. As such Mr. Biden deserves the strong corrective he gets from, among others, The Wall Street Journal:
More than a quarter of gas stations have closed since the 1990s because they couldn’t make the economics work. If retailers were to sell fuel at cost, most would go out of business. Perhaps those owned by large refiners would survive, but they’d be accused of predatory pricing by Mr. Biden’s antitrust cops.
The President’s economic ignorance isn’t a one-off. In recent months he has accused oil and gas companies of price gouging and demanded that they increase production even while his Administration threatens to put them out of business. Mr. Biden doesn’t understand that businesses make long-term decisions based on demand expectations and policy signals. Jeff Bezos called the President’s weekend tweet “either straight ahead misdirection or a deep misunderstanding of basic market dynamics.” They aren’t mutually exclusive.
Indeed, the Biden team’s misdirection is just a manifestation of its misunderstanding…of market function, prices, incentives, regulation and so on.
And if you think the gas station episode was bad, buckle-up, because Team Biden is about to face a cascade of troubles thanks to one of his oldest political backers…Big Labor:
…the labor contract for 29 West Coast ports, which covers 22,000 dockworkers, lapsed over the weekend.
For now, talks continue; the two sides are reportedly fighting over port managers’ desire to automate more operations, as major ports in Europe and Asia have already done. But if a work stoppage or slowdown results, it could wreak havoc on the country’s already-fragile supply chains, with potentially catastrophic consequences for inflation and the economy.
Also, of course, for Democrats’ chances in the midterms.
This isn’t some remote risk. The last time this contract was being renegotiated, starting in 2014, talks broke down and work slowdowns led to expensive shipping delays. The Obama administration had to intervene. Labor disruptions (strikes, lockouts, slowdowns) also occurred during West Coast port contract negotiations in 2002, 2008 and 2012.
Does Biden side with his old allies in the labor movement? Or does his professed determination to fight inflation convince him to convince them to get back to work?
Given Biden’s grasp of economics, we should prepare for the worst.
Biden's Energy Department said move would 'support American consumers' and combat 'Putin's price hike'
The Biden administration sold roughly one million barrels from the Strategic Petroleum Reserve to a Chinese state-controlled gas giant that continues to purchase Russian oil, a move the Energy Department said would “support American consumers” and combat “Putin’s price hike.”
Biden’s Energy Department in April announced the sale of 950,000 Strategic Petroleum Reserve barrels to Unipec, the trading arm of the China Petrochemical Corporation. That company, which is commonly known as Sinopec, is wholly owned by the Chinese government. The Biden administration claimed the move would “address the pain Americans are feeling at the pump” and “help lower energy costs.” More than five million barrels of oil released from the U.S. emergency reserves, however, were sent overseas last month, according to a Wednesday Reuters report. At least one shipment of American crude went to China, the report said.
The Biden administration also claimed the Unipec sale would “support American consumers and the global economy in response to Vladimir Putin’s war of choice against Ukraine” and combat “Putin’s price hike.” But as the war rages on, Unipec has continued to purchase Russian oil. In May, for example, the company “significantly increased the number of hired tankers to ship a key crude from eastern Russia,” Bloomberg reported. That decision came roughly one month after Unipec said it would purchase “no more Russian oil going forward” once “shipments that have arrived in March and due to arrive in April” were fulfilled.
The White House did not return a request for comment. Its decision to sell barrels from the country’s Strategic Petroleum Reserve to a Chinese conglomerate comes as the American public increasingly sours on Biden’s energy policies. According to a January Gallup poll, roughly three in four Americans are not satisfied with the federal government’s national energy policy, the highest level in roughly two decades.
Power the Future founder Daniel Turner admonished Biden for selling “raw materials to the Communist Chinese for them to use as they want.”
“We were assured Biden was releasing this oil to America so it could be refined for gasoline to drive down prices at the pump. So right off the bat, they’re just lying to the American people,” Turner told the Washington Free Beacon. “What they’re saying they did and what they did are not remotely related.”
Turner also said the decision highlights the Biden family’s “relationship with China.” Biden’s son, Hunter Biden, is tied to Sinopec. In 2015, a private equity firm he cofounded bought a $1.7 billion stake in Sinopec Marketing. Sinopec went on to enter negotiations to purchase Gazprom in March, one month after the Biden administration sanctioned the Russian gas giant.
Biden campaigned heavily against the oil and gas industry in 2020, promising to “end fossil fuel.” He went on to cancel the Keystone XL pipeline and implement a moratorium on new gas leases on federal land during his first month in office. Biden’s energy secretary, meanwhile, is working with left-wing activists who want to eliminate fossil fuels, and in late October, House Oversight and Reform Committee Democrats pushed top oil executives to produce less gas due to climate change.
Gas prices have since soared to record highs. In mid June, the national average for a gallon of gas surpassed $5 for the first time ever. Still, the White House has assured Americans that they need to pay high gas prices to support the “liberal world order.”
“What do you say to those families that say, ‘Listen, we can’t afford to pay $4.85 a gallon for months, if not years?'” CNN anchor Victor Blackwell asked Biden economic adviser Brian Deese in late June. “This is about the future of the liberal world order and we have to stand firm,” Deese responded.
Increased energy prices in the wake of Russia’s war on Ukraine have caused critics of the Jones Act to claim the law is contributing to more expensive domestic petroleum products.
The law merely limits waterway shipping within the U.S. to American-built and -owned ships crewed by Americans, but its detractors falsely claim that repealing it would help lower costs.
The fact is the cheapest and safest way to move petroleum and natural gas products across a nation — and even a continent — is through pipelines.
The real culprit behind the high cost of transporting energy are extremists who oppose pipelines and prevent them from being built. Without such needed pipelines we will continue to pay too much to transport petroleum.
The Jones Act has nothing to do with these costs and in fact has many benefits. It is time for its opponents to stop playing politics.
As Americans have vividly seen in the last few years, building a pipeline is a political football. It takes years, even decades, to obtain the required political approvals.
And even once obtained, such permits can be reversed by know-nothing political activists. So this political circus arranged by these pipeline circus clowns means we overpay to transport oil.
The U.S. has more than 3 million miles of pipelines linking natural gas production and storage facilities with millions of American consumers — including homes. Those who argue that pipelines are inherently dangerous are simply wrong.
We have decades of data with millions of miles of pipelines — even going through neighborhoods. Pipelines are reliable, economical and safe.
Likewise, gasoline isn’t typically shipped in tanker trucks from refineries to local gas stations. There are pipelines that bring the gasoline to regional terminals. Then trucks take the gasoline from those terminals to local gas stations — thus limiting the miles that gasoline is transported via highway.
When extremists make it unnecessarily difficult to build this needed energy infrastructure, we can’t pretend the Jones Act is why we are overpaying to transport energy.
On the other hand, the Jones Act has a number of important benefits that its detractors would like to ignore.
The Jones Act simply requires that waterway shipping within the U.S. is done by American-built, -owned and -crewed ships. It doesn’t prevent foreign shippers from coming to our shores. But they can’t sail up our rivers and make multiple stops.
The Jones Act was intended to ensure that we have a viable shipbuilding and repairing capability to support our military. In a world where many foreign nations heavily subsidize their shipping industries, we must not allow ourselves to become dependent upon other nations to maintain our naval capability.
Former Vice Chairman of the Joint Chiefs of Staff, Gen. Paul Selva said, “I am an ardent Supporter of the Jones Act. [The Act] supports a viable shipbuilding industry, cuts cost and produces 2,500 qualified mariners.”
Likewise, Former Coast Guard Commandant, Admiral Paul Zunkunft said, “You take the Jones Act away, the first thing to go is these shipyards and then the mariners. … If we don’t have a U.S. fleet or U.S. shipyard to constitute that fleet how do we prevail?”
The military understands that the Jones Act is critically important to our national security.
Our adversaries would like a weaker America, not a stronger one. And the Jones Act helps keep us strong. If we haven’t learned in the past few years that being dependent upon hostile powers is both risky and costly, we haven’t been paying attention.
The Jones Act also has a significant impact on homeland security.
Dr. Joan Mileski, head of the Maritime Administration Department at Texas A&M, said, “If we totally lifted the Jones Act, any foreign-flagged ship could go anywhere on our waterways, including up the Mississippi River.” This would make our defenses incredibly porous as we have more than 25,000 miles of navigable inland waterways.https://e04e5a828992561bbe9773e12b110d72.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
Michael Herbert, Chief of the Customs & Border Protection’s Jones Act Division of Enforcement said: “We use the Jones Act as a virtual wall. Without the Jones Act in place, our inland waterways would be inundated with foreign-flagged vessels.”
Without the Jones Act, Chinese Communist Party leader Xi Jinping or Russian President Vladimir Putin could gain access to America’s heartland, sending ships to operate up and down the Mississippi River. They could spy and even unleash weapons from container ships.
The Jones Act protects America. Blaming the Jones Act for the fact that extremists have hamstrung our nation’s energy infrastructure and driven prices up is a profoundly stupid argument.
The world is a dangerous place, filled with adversaries that will be all too happy if the Jones Act is weakened.
The president has an unerring instinct to make problems worse
“This is a wartime bridge to increase oil supply into production,” President Biden said during his announcement Thursday that he would release more barrels of oil from the nation’s Strategic Petroleum Reserve than at any point in American history. His decision was also a concession. None of the policies Biden has enacted throughout his short presidency have alleviated the problems they were meant to solve. Quite the opposite: In practically every case, Biden has made things worse.
Energy? Killing the Keystone pipeline was one of the first things Biden did when he took office. In February, Biden delayed approval of new oil and gas leases. He continues to blame the increase in gas prices on Vladimir Putin’s invasion of Ukraine, even though prices began to rise early in Biden’s term. Biden scapegoats oil companies for sitting on profits, while he could be doing everything in his power to ramp up domestic production of available fuel sources—including nuclear.
The fallout from Putin’s war was bound to make energy scarce and thus more valuable. Biden could have lessened the pain on the American consumer by pursuing an all-of-the-above energy dominance policy from the start, and by reducing the size of the American Rescue Plan so that it didn’t contribute to inflation. He chose to ignore the warnings of economists such as former Treasury secretary Lawrence Summers and followed his advisers who incorrectly predicted that inflation would be temporary. By turning to the Strategic Reserve, Biden is promoting a temporary fix while the long-term solutions are plain to see. He’s relied on similar gimmicks before. They haven’t worked.
Consider Biden’s immigration policy. He spent his early days as president tearing up President Trump’s agreements with Mexico and several Central American countries that forced asylum-seekers to stay in third-party nations while U.S. judges decided on their claims. The rush for the border was swift and ongoing. This week, Biden is expected to reverse a rule Trump enforced during the coronavirus pandemic that allowed border agents to repatriate illegal immigrants swiftly because of the public health emergency. Homeland Security officials tell the New York Times that because of Biden’s decision they are planning on unauthorized crossings to double from an already high level. Republicans must be giddy with anticipation at the coming headlines.
Immigration and the border were the first places where you saw erosion in Biden’s job approval numbers last spring. Now he’s about to do something that will undermine border security and his political standing, and for no discernible reason. The pandemic is not over. Border crossings aren’t falling. We know that Biden’s decision will attract additional illegal immigrants. Nothing about this policy makes sense.
Biden doesn’t make sense. His Europe trip was a substantive success but a stylistic failure. The Western alliance is holding. But the president gaffed his way across Eastern Europe—saying the West would respond “in kind” to a Russian chemical attack, denying the deterrent value of sanctions when his subordinates have said precisely the opposite, telling U.S. troops that they would see the horrors of war in Ukraine firsthand, then raising the possibility that America’s strategic goal is regime change in Russia. Then, when Fox’s Peter Doocy soberly asked him about these inadvisable statements, Biden denied that he had said anything problematic.
I happen to believe that the world would be a safer place if Vladimir Putin were out of power—that indeed one possible consequence of a Russian defeat in Ukraine is Putin’s demise. I also believe that presidents shouldn’t sound like me. They need to watch their public statements because, as we were reminded throughout the Trump administration, words matter. Biden’s sentiment in Warsaw was correct. His sense of timing was wrong. After all, you never get in trouble for what you don’t say. Biden’s problem is that he rarely lets his actions speak louder than his words. And the words are garbled.
People notice. They don’t like what they hear, they can’t stand what they see. The public verdict on Biden is grim. He has not benefited from a rally-around-the-flag effect. His approval rating continues to fall. He’s at 41 percent approval in the FiveThirtyEight average of polls. He fell under 40 percent approval in this week’s Marist poll. Republicans continue to lead the congressional generic ballot. Democrats recognize that the electoral battlefield has widened. Biden is running out of time to improve his standing. And he hasn’t demonstrated an ability to bounce back as president.
Biden entered office at a time of national emergency. He benefited from the public’s desire to see Donald Trump off the airwaves for the first time in years. He oversaw the successful implementation of the vaccination program Trump had started. The resilience of the American economy helped him too.
Then the situation went sideways. Biden’s problems started on the southern border, ramped up with the Delta variant of coronavirus, accelerated with inflation, spread with the debacle in Afghanistan, and haven’t abated since. His rallying of the West in support of Ukraine is laudable, but he still hasn’t done enough to help the Ukrainians and he keeps stumbling on his own message. His commitments to the left wing of his party keep him from embracing the center. And damaging leaks about the federal investigation into his son’s finances only will mount if Republicans take Congress in November.
Biden’s reliance on the Strategic Petroleum Reserve is telling. This is a presidency that is running out of gas.
President Joe Biden has a problem with numbers. He can’t make them add up and it’s not clear that he knows what they mean. He’s so devoted to his progressive narrative that he becomes confused when the data doesn’t support the conclusions he and his economic team want to reach.
This leads him to say all kinds of wacky things about taxes and prices and spending and inflation that are undermining the American public’s confidence in the U.S. economy. It is possible, as has been proved more than once over the last 25 years, to talk us into a recession. And, with the Atlanta Fed projecting zero growth for the first quarter of 2022, the president and his team may be doing just that.
Consider Biden’s remarks in his most recent State of the Union Address. As a way of pumping up the enthusiasm over his plan to fight inflation and rebuild the American economy following the lockdowns, he criticized the pro-growth tax cuts enacted under his predecessor. “Unlike the $2 trillion tax cut passed in the previous administration that benefited the top 1 percent of Americans,” he said, his American Rescue Plan “helped working people – and left no one behind.”
That, to put it mildly, is an exaggeration of the worst order. The Trump tax cuts benefited the top 1 percent of income earners because they benefited everyone who pays federal income taxes. The only people they didn’t help directly were the roughly 50 percent of Americans who don’t make enough money to pay income tax to Uncle Sam.
Some people, including Mr. Biden, think that’s unfair. Then again these are the same people who confuse tax avoidance – which is the lawful attempt to minimize one’s tax payment – with tax evasion. The latter, which is the practice of not paying taxes legitimately owed, is illegal. If the president and his congressional allies like Senate Finance Committee Chairman Ron Wyden, D-Ore., had their way the former might become illegal any time now too. But that’s a matter for another day.
The Tax Cuts and Jobs Act Biden derides as only benefiting the wealthy increased the incentive for those “of means” and those who wished to someday be “of means” to make more frequent and more valuable capital investments expecting, as was shown to be the case before the pandemic-inspired lockdowns jiggered the system, that greater financial risk produced greater financial rewards.
This created an environment in which almost every American was a winner. The economy grew, jobs were created, and unemployment sank like a stone among the demographics that garner the most media attention like single women, young African-Americans and Latinos. Productivity rose and with it, as most analysts reported, so did wages.
Biden doesn’t get that. He still believes that for the rich or powerful to do well, the poor and struggle must suffer. It’s an outmoded way of thinking that most people thought died out with the Soviet Union but, as Putin’s invasion of Ukraine reminds us, some threats just never go away.
He’s got it all cocked up on energy too. Asked Thursday about rising prices at the pump, Biden blamed the war in Ukraine and the sanctions that have been imposed on Russia for the spike. That has something to do with it to be sure. The bigger cause is the way the president used what former House Majority Leader and Ph.D. economist Dick Armey calls “the invisible foot of government” to kick America’s energy independence to the curb.
The price of gasoline is rising because America’s energy sector cannot increase production to levels sufficient to meet the demand for gasoline at less than $3 per gallon. To put it another way, Biden broke the spigot by suspending oil leases, restricting exploration, reinstating economically counterproductive regulations, killing the Keystone XL pipeline and doing whatever else he and his brain trust could to conceive to force consumers to speed up their adoption of wind and solar power.
How’s that worked out? Well, since he’s come into office the average American family have seen their annual energy costs increase, by some estimates, by more than $1,000, gas prices have reached the highest level ever recorded – above $4 per gallon on average in 38 states – and congressional Democrats are once again talking about instituting a special tax on “excess” energy company profits that can be paid out to low-income individuals and families to help them deal with higher prices. To call that madness is an insult to the insane.
When asked what he plans to do, the best answer Biden could come up with was to suggest there wasn’t much he could do about it right now. Then he talked about oil companies and production increases and investments as though he understood it all. Here’s what he told the members of the Democratic National Committee Thursday night:
“We are increasing oil production with a [sic] record productivity. By the end of the year, we will have produced more oil than any time in the last number of years. … The CEOs of major oil companies have said they’ll increase investment and production… My message is: It’s time — in this time of war, it’s not a time of profit. It’s time for reinvesting in America. And they hear it. You know, there’s a — there’s an impediment to production in the United States, and it’s called ‘the bankers on Wall Street.’ And this crisis is another indication of why we need to get off dependency on fossil fuels.”
That may be confusing to follow so, to translate, in the president’s view: 1) Energy companies are bad because they profit when prices rise because the politicians have created a global crisis of the 1st order; 2) We have plenty of oil but business isn’t producing it so they can make more money; 3) The big bad bankers on Wall Street are behind it all; and, 4) We need to go green.
As they say, there’s nothing like letting the facts get in the way of a good narrative.
Biden forgot to mention a lot, including how the national average price of gas was already up by $1.14 before Russia invaded Ukraine because of the anti-fossil energy initiatives his administration had taken or announced plans to take — like the Biden SEC’s effort to force public traded companies to disclose the potential economic impact to their business from global warming and greenhouse gas production.
From the largest Cabinet Department to the smallest independent agency, the Biden administration is waging a regulatory war on fossil fuels that touches every sector of the economy. And all the president can say is “What? Who? Me?” A convenient memory lapse assisted by a fundamental misunderstanding of economics is killing off the American energy renaissance.
America needs energy independence and a much larger military to deter Putin
Ever since last year, when Vladimir Putin began preparing for an invasion of Ukraine, President Biden has tried to deter him. Biden tried to reason with the Russian autocrat. He released declassified intelligence to rally the world against the imminent threat. He supported French president Emmanuel Macron’s last-ditch attempt at diplomacy. He warned Russia that a war would be met with harsh economic sanctions.
Nothing worked. Negotiations failed. So-called “deterrence through disclosure” had no effect. The threat of punishment carried no weight. The invasion began in the early hours of February 24. The largest military action undertaken on the continent of Europe since World War II is underway. Anyone who pretends to know what will happen next is kidding themselves.
President Biden and America’s allies in Europe have prepared a program of sanctions to punish Putin, his inner circle, and the Russian security and military services for this unprovoked assault on an independent nation of some 40 million people. Biden is right to do so. Free societies have an obligation to demonstrate their revulsion toward despotism. Any cost imposed on Putin is worthwhile.
Yet sanctions aren’t enough. The record is clear: Sanctions make a point, but they rarely achieve their goals. The American president can no longer pretend that economic coercion alone will do the trick. A grand strategy is required to make Putin’s invasion and possible occupation of Ukraine as painful for him as possible, to stop him from expanding the war, and to reestablish deterrence.
America’s economic, military, technological, and cultural power must be aligned toward shielding democracy in Europe and undermining the Russian war machine. Limiting ourselves to sanctions and diplomacy won’t make Putin think twice before demanding more of the West. Quite the opposite: He will brush his shoulder off. He will look for another target.
The first task is to assist Ukraine in its existential conflict. The flip side of sanctioning Russia ought to be providing additional financial aid to the elected government of Ukraine. Weapons should follow the money.
The president can declare that America will not recognize, nor will international organizations seat, a Russian-backed Ukrainian regime. He can prepare to support a Ukrainian government in exile and to supply anti-Russian partisans in occupied territory. Abandoning Ukraine to fight unassisted would be worse than a betrayal. It would make Putin’s life easier. It would enhance his personal rule. That is exactly what we do not want.
Second, Biden must abandon his energy strategy. Nothing less than a total reversal of his approach is necessary. Certain times require a reevaluation of priorities and a reorganization of values. The global crisis that Putin has set in motion is such a moment.
Putin tends to lash out when gas prices are high. Lowering these costs will not be easy. It will take time. And the only effective means of lowering the price of energy is increasing its supply.
Biden must embrace oil and gas exploration. America was energy independent just a few years ago. The American president must do everything he can to make us independent again. While he’s at it, he needs to blanket Europe with liquid natural gas (LNG) facilities, call on the German government to reevaluate its attitude toward nuclear power, and ask the U.S. Congress to subsidize new nuclear plants here at home.
Soliciting OPEC is a crutch. The green-energy transition must wait. Turn on the spigot of American oil and gas to drown out Putin’s energy weapon. Failure to do so would be another self-inflicted wound.
Third, Biden needs to ask Congress not only to pass the authorized defense budget, but to send him an emergency supplemental appropriations bill that dramatically ramps up military spending. Biden’s idea that he could minimize the role of the Defense Department and conduct foreign policy through the State Department and—God help us—John Kerry was always delusional. Now it’s dangerous.
Congress authorized, but hasn’t passed, a defense budget greater than the one Biden requested. Even this increase, however, amounts to a net cut thanks to inflation. America needs to spend more on defense—much more. This additional spending ought to include enhanced research and development as well as updating and expanding America’s nuclear arsenal.
America needs more of everything—more troops, more tanks, more planes, more ships, more drones, more UAVs and USVs, more ABM systems, more chips, and more connectivity. And we need it soon. Ronald Reagan grabbed the Kremlin’s attention with his defense budgets. Biden has not. He needs to mimic Reagan, not Barack Obama, if he wants to stop his presidency from sliding entirely into chaos.
Finally, Biden has an opportunity to reassert himself as leader of the Free World. Biden has sounded the right notes on democracy, but his actions have not supported his rhetoric. He is responsible for the extinction of democracy in Afghanistan. He could not stop Putin from attacking Ukraine. If he does not change his approach, he probably will watch China take Taiwan before his term is over.
Supplementing economic sanctions against Russia with military aid to Ukraine, a liberalized energy policy, and massive defense spending will help anchor Biden amid the authoritarian riptide. To press forward, however, he needs to make a robust case for democracy in multiple venues. He needs to rush reinforcements to NATO members such as Poland and Romania, the Baltic States, and Croatia, Albania, and Montenegro. And he needs to live up to his rhetoric of national unity by nominating a Supreme Court justice who will attract GOP votes and inviting national security officials who have worked for Republicans to join his team.
One of the reasons that the West misjudged Putin was our minimization of ideology in world affairs. We tend to believe that everyone is, in the end, like us—they think like us, they want the same things as us. But we are wrong. Putin and Xi Jinping have different belief systems, different values. And these divergent ideas motivate them to pursue horrific ends.
Every American president has a responsibility to stand for, speak for, and support the values of political and religious liberty at the heart of our experiment in self-government. The most recent occupants of the Oval Office have not quite lived up to the job. The egregious acts of Vladimir Putin offer President Biden a chance to turn things around. Pray that he seizes this opportunity.
The hidden agenda behind the new president’s busy week
No one can accuse President Biden of easing into office. His first days have been a blizzard of executive orders, presidential memorandums, and official proclamations. He says he wants to overturn the worst policies of the previous administration, and to restore a sense of national unity and institutional integrity. What gets lost in the details of all these initiatives is Biden’s partisan goal.
It’s not just that the new president wants to resume the trajectory America was on when Barack Obama left office in 2017. He also wants to claw back the gains red states made over blue states during the last four years. He wants to shift federal resources to Democratic constituencies, and to save the blue states from the true cost of their misguided policies. And if red America has to pay a price in lost jobs and tax revenue, well, that’s too bad.
Leave aside, for the purposes of this discussion, the relative merits of Biden’s executive actions. (I disagree with almost all of them.) Focus instead on their distributional effects, not on individuals but on sectors of the economy, on regions of the country, and on the donor bases of the two parties. The image that comes to mind is of swarms of dollars changing course midflight: a mass migration of subsidies, spending, and incentives from the GOP coalition to the Democratic one.
Start with energy. Biden killed the Keystone XL pipeline at a cost of 1,000 jobs and diplomatic goodwill with Canada. He banned fracking on federal lands and paused oil and gas lease sales in the Arctic National Wildlife Reserve. According to a White House fact sheet, he told federal agencies to “accelerate clean energy and transmission projects.” He is sure to bestow federal largesse on the sons of Solyndra.
The alternative energy sector overwhelmingly favors Democrats. Its political investments have paid off. The old-style extractive industries, mainly based in GOP strongholds, will suffer. In some cases they are targeted for extinction. The knock-on effects are serious. “Wyoming state superintendent Jillian Balow notes that her state depends on some $150 million a year in oil and gas federal royalties to fund K-12 schools,” says the Wall Street Journal editorial board.
Other Biden measures resumed the flow of government aid to the special interests behind his campaign. The second Catholic president has jumpstartedfederal funding of Planned Parenthood almost two years after President Trump cut off the nation’s largest abortion provider. Biden also reversed President Trump’s ban on money for “sanctuary cities” that choose not to enforce federal immigration law. That decision will help boost the budgets of progressive municipalities eager to pass off the costs of illegal immigration. Biden’s codification of the Supreme Court’s Bostock decision, which made gender identity protected under civil rights law, and his lifting of the ban on trans soldiers is sure to please a class of donors essential to Democratic Party finances.
Biden’s proposed American Rescue Plan best captures the new administration’s intermingling of public policy and greasy-pole gamesmanship. Take, for example, the $130 billion that Biden wants to spend on K-12 schools. That number is on top of the $67 billion Congress already has committed to reopening elementary and secondary schools.
The additional cash is a handout to the teachers’ unions, who have opposed a return to in-person instruction at every opportunity, and who are among Biden’s closest allies. Biden has adopted the unions’ rhetoric, saying that schools cannot open until they have been renovated. He’s wrong, of course—measures such as masks, hygiene, and social distancing are enough to stop the spread, especially among the elementary schoolers who need in-person classes the most and whose transmission rates are low. But science doesn’t matter. The unions must get paid.
One year after COVID-19 appeared in America, it is more than evident that arbitrary, statewide lockdowns are a disaster for small businesses, which happen to be a key part of the Republican coalition. The states that have done the most to reopen have best weathered the economic storm. And these same states tend to be low-tax, low-minimum-wage, and have a business-friendly regulatory environment, as well as a warmer climate. The Wall Street Journal reports that the South is leading America’s recovery. But, in the heavily Democratic northeast, “The recovery of jobs has lagged behind.”
What does Biden want? His solution is to make Florida and Texas more like New York and California. My colleague at the American Enterprise Institute, Paul H. Kupiec, calculates that the nationwide $15 minimum wage contained in the American Rescue Plan would “shift business formation, growth, and employment from red states to blue, as the higher minimum wage erodes red states’ labor cost advantage in many job categories.” What’s best for Cuomo, however, is not what’s best for the country.
A steep minimum wage hike in the middle of an economic crisis that disproportionately affects small business is the exact opposite of what you want to do to spur full employment. But it does make sense if you are using the crisis to gain leverage for unions and government over free labor and the private sector.
Blue America began to claw back red America’s earnings last week. And the next four years (at least) will see the Biden coalition press its advantage.
Up until the Trump presidency, politicians regularly talked about the need to make America energy independent. That talk has stopped, largely because the goal has been reached. The U.S. is now a net energy exporter, thanks almost entirely to the development of new technologies that allow us to find fossil fuels where they could not be found before.
The oil and natural gas boom brought about by fracking has not only ended the nation’s reliance on crude oil imports, it also put an end to the domestic coal industry. As a result, U.S. carbon emissions are down significantly, lower even than the targets fixed in the international Paris Climate Accord from which President Donald J. Trump withdrew the nation shortly after entering office.
Rather than cheering these developments, former Vice President Joe Biden wants to bring them to an end. He wants the nation to be depended on synthetic and renewable fuel substitutes that are not yet developed and wind and solar power that is expensive to build, even more expensive to maintain in good working order, and which has proven harmful to birds and other wildlife – all to appease Luddite environmentalists who fill his campaign coffers with money and his campaign offices with activists.
To what should be his shame, Biden can’t be clear with the American public about what he has in mind for U.S. energy production save for statements about his plan to end our reliance on fossil fuels to heat and cool our homes and businesses and power our factories within several decades.
The technology to do all this is unproven, at least at the commercial-scale required to produce the base power load needed. Yet he dismisses technologies like fracking that are proven as environmentally harmful and unnecessary.
Contrary to what he’s said while debating Mr. Trump, Mr. Biden has said repeatedly he would end fracking in the United States. He’s been caught on tape more than once making this promise. In a July 2019 interview with CNN’s Dana Bash, Mr. Biden said he would eliminate fracking. “Would there be any place for fossil fuels including coal and fracking in a Biden administration?” she asked. Mr. Biden responded, “No, we would work it out. We would make sure it’s eliminated.”
In his October 22 debate with Mr. Trump, Mr. Biden again promised he would shut down the entire American oil industry. Here’s this, from the transcript, so you can read it yourself:
President Donald Trump: Would you close down the oil industry?
Former Vice President Joe Biden: By the way, I have a transition from the old industry, yes.
President Donald Trump: Oh, that’s a big statement.
Former Vice President Joe Biden: I will transition. It is a big statement.
President Donald Trump: That’s a big statement.
Former Vice President Joe Biden: Because I would stop.
Moderator Kristen Welker (NB): Why would you do that?
Former Vice President Joe Biden: Because the oil industry pollutes, significantly.
Whether or not he used the word “ban” is irrelevant. If he can’t ban it, he’ll tax and regulate and sue it out of existence by raising the costs involved with it to a level when it no longer makes economic sense to do it.
If Mr. Biden’s plan prevails, it won’t just devastate the economies of Pennsylvania, Ohio, Texas, Colorado, and New Mexico, and it won’t just send millions of Americans whose jobs depend on the fracking industry onto the unemployment lines, it will produce higher prices at the pump for every American while making the nation once again reliant on foreign oil imports coming from politically unstable parts of the world. If that weren’t enough, the biggest beneficiary of the Biden plan will be Russia’s Vladimir Putin, who just can’t wait to get the rest of the world, particularly eastern Europe, dependent once again on his country’s crude and natural gas.
No amount of spin or clean up from Mr. Biden or his team can explain away what he’s promised to do. The former Vice President said “Yes” when the president asked if he would close down the oil industry. Mr. Biden’s stance towards almost everything that goes into U.S. energy independence shows him to be a job killer, a friend to the oil sheiks and eastern European oligarchs and others who’d like nothing better to have their knees on the necks of U.S. industry by controlling the nation’s supply of energy.
In late spring, oil prices dipped below zero for the first time ever. Futures contracts for May delivery traded as low as negative $37 a barrel, as producers and speculators paid refineries and storage facilities to take excess crude off their hands.
In some sense, this historic moment was inevitable. Oil markets are completely saturated. Worldwide coronavirus lockdowns have depressed energy demand. And in March, Saudi Arabia and Russia announced they would increase production, thus exacerbating the glut.
President Trump has tried to help beleaguered U.S. producers. He recently mediated a deal between Saudi Arabia, Russia, and other major oil producers, who collectively agreed to cut production by nearly 10 million barrels a day.
But prices are still falling. And now, the White House is toying with other ways to prop up U.S. oil producers, ranging from tariffs on imported oil to direct cash payments to energy companies.
This desire to help energy companies, and the millions of workers they employ, is commendable — but ultimately counterproductive. In the long run, the industry will emerge stronger if the White House allows the free market to resolve this crisis.
This pandemic-induced economic crisis is going to be painful for the energy sector. Cost-cutting and layoffs are already underway.
But the industry is strong and adaptive, and has bounced back from past crises by investing in technology. In fact, economic pressure encourages the kind of innovation and belt-tightening that helps companies thrive in the long run.
The United States last faced low oil prices in 2014 and 2015, when Saudi Arabia ramped up output to try to cripple U.S. producers that specialized in fracking — a technique used to extract oil from underground shale rock. By early 2016, prices had dropped below $30 a barrel, well below what U.S. shale producers needed to break even.
The government didn’t come to the rescue, which forced frackers to get creative. They researched how to extract more oil for less, and came up with a variety of new techniques, like drilling several wells simultaneously and using drones to detect faulty equipment. As a result, the average break-even price for frackers dropped from $69 a barrel in 2014 to an average of $40 a barrel by 2017. Had the government tried to solve the problem by slapping tariffs on Saudi crude, the U.S. oil industry likely would have never set its all-time production record of 13.1 million barrels a day in February.
We can be confident the U.S. energy industry will apply its ingenuity to this crisis, too — because these days, it excels at invention. In 2019, the oil and gas sector increased adoption of digital technologies, including cloud data storage and new software. Over the next five years, digitizing could slash the cost of oil production by almost 10 percent.
By using sensor technology — tiny, data-tracking devices attached to oil-field gear — producer ConocoPhillips recently cut in half the amount of time it took to drill new wells in South Texas. Other companies are using data analytics to search for the best drilling locations.
In short, the pressures of a downturn are likely to encourage even more future-focused transformation. The industry doesn’t need to hide behind tariffs. If we trust the free market to encourage creativity, in the long run, we’ll all benefit from a cheaper and more efficient energy supply.
Crude oil prices fell dramatically over the weekend. Between March 4 and March 9, Brent crude, the international benchmark, fell from $51.13 to $34.36 per barrel, a drop of 32.8 percent. As of this writing (the afternoon of March 10, EDT), the price has recovered to $36.89 per barrel. The price of U.S. West Texas Intermediate crude, the standard measure of U.S. oil prices, fell from $46.78 on March 4 to $31.13 on March 9, a drop of 33.5 percent. Pippa Stevens at CNBC wrote that “U.S. West Texas Intermediate crude and international benchmark Brent crude are both pacing for their worst day since 1991.”
Why worst? Implicit in Stevens’s statement is the idea that low oil prices are bad. All other things equal, of course, low oil prices are bad for oil producers. But also, all other things equal, low oil prices are good for oil users. And the latter includes all of us. How do we assess whether the net effect of the plunge in oil prices is good or bad? We have to look at why they fell suddenly. We pretty much know why: a temporary collapse of the Organization of Petroleum Exporting Countries (OPEC.) For that reason, the drop in oil prices over the weekend is good. It’s roughly a wash for the U.S. economy and it’s good for the overall world economy.
A most useful principle I learned in my Ph.D. economics program at UCLA, about which Professor Benjamin Klein never failed to remind his students, is “Never reason from a price change.” Scott Sumner, an economist at the Mercatus Center and one of my co-bloggers at EconLog, often points that out in his posts.
Let’s apply that lesson here. There are three (and only three) reasons that oil prices drop: (1) demand decreases, (2) supply increases, or (3) the monopoly power of oil producers falls.
When economists say that demand decreases, we mean something very specific—that at any given price, the amount demanded decreases. There are two main ways that can happen: a slowing of the world economy or an increase in the supply of a substitute.
If the world economy slows—and it certainly looks as if it has slowed, or will, due to the COVID-19 virus and people’s reaction to it—the demand for oil will fall. With a given supply, that will cause the price of oil to fall. The fall in the price of oil is not bad per se; rather, it’s a consequence of something bad, namely, the slowing of the world economy. And it certainly appears that a fall in demand due to a slowing economy caused prices to fall before last weekend. But it’s unlikely that there was a sudden fall in demand last weekend. We have to look elsewhere.
The other possible cause of a fall in the demand for oil is an increase in the supply of a substitute for oil. If, for example, solar or nuclear energy became more competitive, the demand for oil would fall. In that case, the fall in oil’s price would be a sign of something good happening in the economy. Did solar, nuclear, or any other energy source suddenly become more competitive over this weekend? No. So that’s not it.
How about an increase in supply? If supply increases, then, with a given demand, prices will fall. Notice that I’m using the word “supply” to mean not the quantity supplied, but the whole supply curve. When an economist says that supply increased, he means that at any given price, the quantity supplied has increased. The whole supply curve has shifted to the right. This sounds wonky and may remind you of an old economics class in which the professor insisted on the distinction between a shift in supply and a movement along a stable supply curve. But here we need a little wonkiness to help us analyze.
But there were no major discoveries of oil or breakthroughs in technology over the weekend that would cause the supply to increase. So that’s not what drove prices down.
There’s one culprit left: a decrease in monopoly power. If buyers and sellers in the stock market think that a major monopolist in the world market has lost market power, the world price of oil will fall. So let’s look more carefully at OPEC to see what went on last weekend.
First, recall that OPEC is a cartel. Government officials of the member countries get together and try to agree on a price. They want a price above what the competitive, non-colluding price would be. To achieve that cartel price, the members must produce an output below the output they would ideally like to produce. Each firm or, more accurately, government (since we’re talking about OPEC) would like to produce more and have every other country produce less. The members of OPEC meet regularly in Vienna to hash out their differences and try to reach an agreement. This time, though, there was real tension between Saudi Arabia’s desires and those of Russia. OPEC lists its members on its website, and although the Russians attended the latest meeting, and typically attend OPEC meetings, Russia is not, and never has been, an OPEC member.
Saudi Arabia is the most important OPEC producer; Russia is the most important non-OPEC producer that attends the meeting. This time, the Saudis and the Russians had a big disagreement. The Saudis wanted to slow or stop the price erosion that had happened due to the drop in demand by cutting output: that of OPEC members and that of other countries that attend OPEC meetings but are not members. The Russians wanted the output cut too but didn’t want to be the ones doing the cutting. As CNBC’s Brian Sullivan put it on Friday, they wanted to have their cake and eat it too. In that respect, the Russians are like the non-Saudi members of OPEC: all of them want the Saudis to cut output. Although the violin I will play for the Saudis’ predicament is very tiny, it is true that they have traditionally been the “swing producer:” the country that sucks it up and reduces output to maintain the price while many other members of the cartel cheat like crazy. At times, the Saudis have produced as little as 4 million barrels a day to support the price; at other times, they have said the hell with it and have produced as much as 10 million barrels per day.
This time the Saudis said the hell with it. They will produce more and the Russians will produce more. Thus the lower price. And it doesn’t take a whole lot more production to drop the price. The reason is that the demand for oil is inelastic: a one percent increase in output will lead to a ten percent drop in price. So all it takes for a 30 percent drop in price is a three percent increase in output.
Is it bad that the price of oil will drop due to a reduction in monopoly power? No, it’s good. Ever since the fall of 1973, when OPEC raised the world price of oil from $3 per barrel to $11, OPEC has had some monopoly power in the world oil market. This causes the price to be higher than the competitive price would be and we oil users respond by using less oil than we would use at that lower competitive price. When the monopoly power comes about, not due to innovation or invention, but due to collusion, as with OPEC, economists almost unanimously object to monopoly: it holds output off the market for which consumers would pay an amount greater than the cost of production. This underproduction causes what economists call a “deadweight loss,” a loss to consumers that is not captured by producers. That’s what OPEC does. In his article on monopoly for The Concise Encyclopedia of Economics, the late Nobel Prize winner and University of Chicago (and Hoover) economist George Stigler laid out the reasoning behind deadweight loss.
So the cut in the price brings the world oil market closer to the competitive price.
Does that mean that the price cut is good for the United States? No. The price cut is good for any country that is a net importer of oil. In recent decades, therefore, the United States would have gained big time from the cut in the world price. The loss to U.S. producers would have been less than the gain to U.S. consumers because we consumers would have gained on every barrel we used and the producers would have lost on the smaller number of barrels they produced.
But something important has happened in the last decade: fracking. As I noted in my most recent Defining Ideas article, fracking substantially increased the U.S. supply of oil and natural gas. In December 2019, the United States became, for the first time since 1949, a net exporter of oil. So the drop in prices is bad for the U.S. economy as a whole: the loss to the producers will exceed the gain to consumers. But it’s only slightly bad because the United States is barely a net exporter.
For the world economy as a whole, then, the drop in oil prices due to demonopolization is a net plus. That should be no more surprising than the fact that the increase in competition in the retail sector is a net plus.
So why has the stock market fallen so much? Part of the reason is, no doubt, the increased panic, possibly justified, about the loss in output due to the Covid-19 virus. You might expect that if the only event affecting the stock market was OPEC’s temporary loss in monopoly power, the losses to industries that produce energy would be only slightly larger than the gain to industries that use energy as an input. But that ignores the fact that a large percentage of the gain from the drop in price is to final consumers, and most of us consumers don’t sell stock in our wealth. There’s no stock called David Henderson, Inc., for example. So a large part of the gain is not visible on the stock market.
French economist Frederic Bastiat wrote, back in the 1840s, that we should always take account of the unseen as well as the seen. The seen is the stock market losses of energy producers. The unseen is the gain to ultimate consumers.
We don’t know what will happen in the next few months, either with the Covid-19 virus, the world economy, the stock market, or oil prices. As Danish physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” But we should be clear that the drop in oil prices due to OPEC’s loss of pricing power is a gain to the world, and close to a wash for the United States.
Just last week, Houthi rebels in Yemen, who are closely aligned with Iran, claimed credit for a drone attack on Saudi oil processing facilities.
News changes fast — a surprising development is that now the Houthi’s say Iran is responsible for the attack and that the Iranians have more attacks planned in the near future. The Houthi’s also vowed not to launch any additional attacks themselves.
Something that is not surprising is that missile defense critics in the U.S. are now arguing that the drone attack proves that missile defense doesn’t work. This is, of course, entirely without merit. Meanwhile, Russian President Vladimir Putin is offering Russian missile defense systems to “help” protect against future attacks from its client state of Iran. Let that sink in.
Given Russia’s intimate relationship with Iran, it is entirely possible the attack was coordinated with Russia. It is not as if this would be out of character for Putin. Of course, Putin has never done anything on the international stage simply to be helpful. He is simply trying to help himself and advance his ambitions.
Imagine if he could get U.S. allies to insert and integrate Russian hardware into their U.S.-made defensive systems. Imagine the hacking potential on something like that. Putin would love to learn more about our defensive systems. For that reason, the U.S. earlier this year canceled sales of high-tech American defensive systems to Turkey, a member of NATO, after they integrated Russian equipment in their defensive systems.
But back to the missile defense critics in the U.S. who are unwittingly helping Putin.
Right now very little is actually known about the attack. While preliminary indications are it was a drone attack, we are not even certain precisely what weapons were used. It is profoundly unhelpful to jump to hasty conclusions to support a misguided ideology — particularly when the primary beneficiary of those hasty conclusions will be an adversary like Putin’s Russia.
Beyond not jumping to silly conclusions without any real facts, it is important to realize that an effective missile defense system is layered. Parts of the system protect against ICBMs which actually at some point in their flight are out of the Earth’s atmosphere. Parts of the system protect against intermediate range missiles and other parts protect against shorter range missiles. Each of these missiles has different travel paths and different vulnerabilities. Thus different defenses are needed.
In football, a good defensive coordinator employs a different defense if the opposing team needs only one yard to score than he would if the opposition need twenty-five yards to score. The same concept is true with missile defense.
Having only one layer of missile defense in place to defend against all sorts of attacks leaves the region vulnerable to the other risks. For example, the Patriot defensive missile system is designed to protect against high-flying targets such as jets and ballistic missiles. It wasn’t designed to defend against low flying drones and short range cruise missiles. Patriot’s radars are not intended to scan such low flying means of attack. Nor was Patriot designed to intercept ICBM’s just outside the Earth’s atmosphere. But we know the Patriot system works very well as we’ve seen it in real life combat defend both troops and civilian populations from missile attack.
Criticizing any particular layer of missile defense for not stopping an attack that it was never designed or intended to stop is like criticizing a 350 pound defensive nose tackle for not doing a good job of racing down the sideline to cover a speedy wide receiver. A good defensive football team is made up of different parts, with different skills and capabilities. Together they are a formidable defense. But playing out of position, they are ineffective.
To defend Saudi oil faculties, they would need a layered system — one that has the ability to protect against ballistic missile attack as well as drones and low-flying cruise missiles. Missile defense critics know this, but they don’t care. They simply want to use an unfortunate news event to promote their misguided anti-missile defense ideology in hopes of a short-term political victory.
Support is growing to repeal a Nixon-era ban that Iran and Russia love.
The Washington news isn’t all bad these days: Republicans and some Democrats are working hard to gather enough votes to repeal the 40-year ban on exporting crude oil. With gasoline prices hitting new lows, now is the right political moment to do something right for the economy and national security.
The ban is a relic from the Nixon era when oil prices spiked and OPEC began. America’s unconventional oil boom has changed everything. U.S. crude production bottomed in 2008 at about seven million barrels per day and is now more than 11 million. The Energy Information Administration estimates that U.S. output could hit 18 million barrels a day by 2040. Crude inventories are at an 80-year high, and imports declined nearly 30% between 2005 and 2013.
The export ban is, paradoxically, one of the biggest threats to this U.S. production boom. The decline in oil prices over the past year has forced U.S. producers to slash investment and cancel projects. The U.S. rig count has dropped 50% since last autumn, and the industry has cut more than 125,000 jobs. Lifting the ban would offer new markets for U.S. oil and mean fewer layoffs. Continue reading
by Marita Noon • Breitbart News Network
Prices at the pump have gone up nearly 40 cents a gallon from the January low—60 cents in California. They will continue to rise while the price of crude oil remains low. Based on explanations, the jump was expected. Every year, at this time, refineries shut down to make adjustments from the “winter blend” to the “summer blend.” It is “refinery maintenance season.”
However this year, the increase is exacerbated. Continue reading
Executives at a Bermudan firm funneling money to U.S. environmentalists run investment funds with Russian
by Lachlan Markay • Washington Free Beacon
A shadowy Bermudan company that has funneled tens of millions of dollars to anti-fracking environmentalist groups in the United States is run by executives with deep ties to Russian oil interests and offshore money laundering schemes involving members of President Vladimir Putin’s inner circle.
One of those executives, Nicholas Hoskins, is a director at a hedge fund management firm that has invested heavily in Russian oil and gas. He is also senior counsel at the Bermudan law firm Wakefield Quin and the vice president of a London-based investment firm whose president until recently chaired the board of the state-owned Russian oil company Rosneft.
In addition to those roles, Hoskins is a director at a company called Klein Ltd. No one knows where that firm’s money comes from. Its only publicly documented activities have been transfers of $23 million to U.S. environmentalist groups that push policies that would hamstring surging American oil and gas production, which has hurt Russia’s energy-reliant economy. Continue reading
by Alex B. Berezow • RealClearScience
World events have made it quite clear to most Americans that we should develop more of our own energy sources. Reducing our reliance on foreign oil by exploiting the natural gas under our feet is not only smart foreign policy but also smart environmental policy: Natural gas burns cleaner than coal or oil, and it has already lowered our CO2 emissions. Natural gas is a win for America and the planet.
But not according to anti-technology environmentalists, who have made all sorts of wild, unsubstantiated claims about the supposed harms of fracking. Three claims in particular are worth examining: (1) Fracking causes a dangerous leakage of methane into drinking water; (2) Fracking causes earthquakes; and (3) Fracking chemicals contaminate drinking water. Continue reading