Joe Biden’s green agenda hits Americans with an oil price shock

Joe Biden - REUTERS/Elizabeth Frantz

Joe Biden – REUTERS/Elizabeth Frantz

When his green credentials were challenged by a young activist on the election trail, Joe Biden had a simple answer.

“Kiddo, I want you to look into my eyes,” the future president said in 2019, grasping her hand. “I guarantee you, we’re going to end fossil fuels.”

In contrast to his predecessor Donald Trump, the Democratic hopeful was promising to drive down America’s use of “dirty” oil and gas and instead pump hundreds of billions of dollars into a renewable energy revolution.

Yet almost three years later as Russia blackmails Europe over gas and Americans fume at soaring petrol prices the president is rowing back on his war against fossil fuels and preaching a starkly different message.

In a recent letter to some of America’s biggest oil companies, he chastised them for making big profits off the back of price rises and called for “immediate actions to increase the supply of gasoline, diesel, and other refined products”.

Biden’s moves, which have enraged eco-warriors within his own Democratic Party, underline the growing alarm in the White House as potentially brutal midterm elections draw near.

But they also amount to a tacit admission that his energy policies, knocked off course by Russia’s invasion of Ukraine, appear to have gone awry.

Kathryn Porter, an energy consultant at Watt Logic, says the President’s actions since taking office “consistently signalled that he wants to protect the climate by reducing oil and gas production” and that he “backed this up with new regulation for the industry”.

“But he failed to consider the impact of a price shock,” she adds.

“Now, with rapidly rising gasoline prices, he is backtracking and accusing oil companies of profiteering, when in reality they are responding to his policies in the way he wanted, by reducing capacity.”

The year before Biden entered the Oval Office, the US had just cemented its energy independence, becoming a net exporter of oil for the first time since 1949.

It has left America in a vastly stronger position than Europe during the current crisis, with the country protected from the kind of gas supply issues that keep officials across the Continent awake at night.

America did this thanks to modern drilling breakthroughs that have unleashed a huge shale boom since 2010, with heartlands such as the Permian Basin in Texas powering a mighty output of 13m barrels of oil per day.

During his election campaign, Biden poured scorn on the industry and vowed to cut back on subsidies, saying he would ultimately like to see the use of coal and fracking “eliminated”.

He said he would not oppose existing fracking but would stop new licences being granted for extraction on federal lands and waters.

Within hours of entering the Oval Office, he kept his word, issuing an executive order to that effect. Biden also revoked a permit for the Keystone XL oil pipeline to Canada and signed the US back up to the Paris climate accords, undoing former actions by former president Trump.

His moves came at a time when the oil industry was still reeling from a collapse in demand during the early months of the pandemic, when Brent crude plunged as low as $19 (£15.6) per barrel.

By the summer of 2021, coronavirus restrictions were being lifted and economies opening up again, causing demand for oil to rebound. But ever since, supply chains have struggled to keep up.

Wary of Biden’s hostile policies, oil companies say they have been taking a more cautious approach to investment in new fracking projects, and focusing on securing returns for their investors.

All the while, petrol prices have ticked up to eye-watering levels, with Russia’s invasion of Ukraine only aggravating the situation.

A year ago, the price of a gallon of petrol stood at about $3.17, meaning it cost about $38 to fill up a typical family car. Those figures leapt to $5 and $60 respectively at one point last month although the price is now a little lower at $4.26, according to the American Automobile Association.

Biden has lashed out at oil and gas companies complaining they are making a killing from refining and need to ramp up production.

“Exxon [Mobil] made more money than God last year,” the President seethed to reporters last month.

In a recent analysis, Katie Tubb, a research fellow at Republican think tank The Heritage Foundation, saw it differently: “We must give Biden the credit that policies have consequences, and reject the administration’s many attempts to shift responsibility for what is the only logical conclusion of policies designed to forcibly wean Americans off fossil fuels: higher prices.”

In the meantime, Biden has junked his promise to block new oil and gas licences as the administration scrambles to bring down petrol prices. The Interior Department last month held the first sale of onshore leases for federal land since he entered office.

The response from businesses was tepid, with industry groups blaming factors such as threatened lawsuits from environmental activists and higher royalties the government was seeking.

“After observing new obstacles to federal development, companies may have decided it’s just not worth the additional time, cost and risk,” Kathleen Sgamma, president of the Western Energy Alliance, told Reuters.

Earlier this year Biden was also forced to eat his words as he vowed to supply Europe with huge shipments of liquified natural gas (LNG), to help make up for reductions in supplies via Russian pipelines.

Before that, he authorised oil drawdowns from the US Strategic Petroleum Reserve to help quell price rises.

Porter says the President’s missteps “illustrate the problem with trying to drive the energy transition from the supply side.”

“Oil and gas companies do not produce oil and gas for fun they produce it because people want to buy it,” she explains.

“Unless consumers are provided with alternatives or choose to reduce demand, reductions in supply simply raise prices.”

Two years ago, Biden confidently promised voters he would seek to eradicate fossil fuels. But as November’s elections loom, he may not want to repeat that vow too loudly.