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Biden got the energy deal he wanted

Trying to limit the political damage from soaring gasoline prices, the Biden administration announced Energy Secretary Jennifer Granholm on Sunday. They would have been better if she had gone to mass.

Appearing on CNN’s ‘State of the Union’, Ms Granholm said ‘we need to ramp up production, so ordinary American citizens don’t feel this pain that they are feeling right now’.

The context of the discussion was President Biden’s upcoming visit to the Gulf Cooperation Council, where he will ask the Saudis to increase oil production. Ms. Granholm understood the general principle well: the response to high prices is increased supply. What she got wrong was locating the solution some 7,500 miles away, in the oilfields of the Middle East.

She didn’t really have a choice. Since taking office, Mr. Biden has worked hard to make American fossil fuel production more expensive so that green energy alternatives become more attractive. He succeeded, and the result is record prices.

On his first day in office, Mr. Biden canceled the Keystone XL pipeline and halted new leases in Alaska’s Arctic National Wildlife Refuge. A week later it banned new oil and gas leases on federal lands and waters, and in June it halted exploration on existing leases in ANWR. In October, it increased regulatory burdens on the construction of pipelines and other infrastructure. In February, it limited leasing in Alaska’s National Petroleum Reserve. At every turn, the Biden team has worked to restrict and reduce domestic oil and gas production.

Nearly a year after a federal judge directed the White House to implement its suspension of leases on federal lands and waters, the administration finally offered 144,400 acres for exploration in April, or only 20% of the area initially planned for this tranche of leases. The administration also increased the federal levy by 50%, increasing the cost to US consumers. He appointed anti-fossil fuel regulators and issued climate disclosure rules that made lenders reluctant to provide capital.

The Biden team got what they wanted: daily oil production in the United States fell from 12.29 million barrels in 2019 to around 11.85 million in 2022, well after demand rebounded from the pandemic.

Mr Biden blames Vladimir Putin, but prices rose a lot before Russia invaded Ukraine. In January 2021, the average price for regular gasoline was $2.33 per gallon. In February 2022, it reached $3.52. In May, the average price was $4.44; therefore 56% of this price increase predates the invasion.

After doing everything in his power to restrict US supply, Mr Biden is now threatening to impose a windfall tax, even though oil and gas production only saw a profit margin net of 4.7% last year. Compare that with Microsoftit is

39% net margin, Facebookit is

33%, Google 30% and Appleit is

27%. Yet Mr. Biden will not confiscate the profits of tech companies.

The president is now proposing a three-month holiday from the federal gasoline tax of 18.4 cents a gallon. But that would increase demand and increase the deficit without doing anything to stimulate production.

If Mr. Biden were serious about lower fuel prices, he would take the advice of President Clinton’s Treasury Secretary, Larry Summers, who on Sunday suggested “a comprehensive approach to energy supply that emphasizes liberation from fossil fuels”. That means undoing all of Mr. Biden’s previous decisions that have driven up oil and gas prices. It is important to start now. It took a year and a half of bad deeds to come to this; it will take time to increase supply and thus produce downward pressure on prices.

For starters, Mr Biden should stop the Environmental Protection Agency’s assault on small US refineries, which produce about 30% of US gasoline and diesel. Longstanding EPA regulations require them to blend renewable fuel into their product or buy special credits at a market, but most can’t blend ethanol because it’s too corrosive to transport through pipelines. . The EPA has long solved this problem by regularly granting these refiners exemptions if no credit is available, as required by law.

Earlier this month, the EPA announced it was essentially ending exemptions and punishing refiners by retroactively denying exemptions to 2016, forcing the industry to pay billions. Even the EPA admits that consumers will have to cover these costs. Industry leaders fear that some refineries will not be able to operate under the new regime and will close instead, further reducing the supply of gasoline and diesel.

In pursuit of climate goals, Mr. Biden’s policies have increased oil and gas costs and reduced supply. The result is rising gasoline and diesel prices at a time when inflation is already driving up the price of everything else. Mr. Biden got what he wanted, and it makes life harder for ordinary Americans. Because of that, there will be hell to pay for Democrats in November.

Mr. Rove helped organize the political action committee American Crossroads and is the author of “The Triumph of William McKinley” (Simon & Schuster, 2015).

Wonder Land: Like other world leaders who have leaned into lockdowns, Joe Biden and the Democratic Party now realize just how complicated the private economy actually is and how easy it is to destroy it. Images: AP/Shutterstock/Bloomberg/Zuma Press Composite: Mark Kelly

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