By David Blackmon
Forbes, Jun. 18, 2022
When it comes to energy policy, the Biden administration really needs to try to get its story straight. Everyone in America’s oil and gas business must be relieved to have made it to the end of what was without doubt the most confusing energy policy week in recent memory.
The confusion started on Wednesday, June 14, when President Joe Biden sent a letter to oil refiners accusing them of engaging in price gouging and demanding that they find ways to refine and produce more gasoline. It was in and of itself a confusing message given that Biden and his agencies have spent their 17 months in office doing everything they can to obstruct and impede the growth of the domestic oil and gas business.
As if to reinforce that reality, at about the same time the President’s letter was being made public, the Interior Department postponed yet another federal lease sale, one that would involve federal lands in New Mexico. It’s important to note that gasoline can’t be produced without the ability to drill for oil, and companies can’t drill for oil without first having a lease, a supply chain reality the Biden officials can’t seem to grasp.
Later that same day, Energy Secretary Jennifer Granholm said in an interview on CNN that “[Biden] is also asking, of course, for the oil and gas industry to increase supply as well by drilling more. They are about 100 rigs shy of what they were before Covid. They need to increase supply.” Again, companies can’t drill without leases, and the federal lands in New Mexico’s Delaware Basin lie atop some of the most prolific oil-bearing rocks on Planet Earth.
Granholm then said this: “What we’re saying is today we need that supply increased. Of course, in five or ten years – actually, in the immediate, we are also pressing on the accelerator, if you will, to move toward clean energy so that we don’t have to be under the thumb of petro dictators like Putin or at the whim of the volatility of fossil fuels.”
So, the current Secretary of Energy seems to believe that corporations are going to just invest billions in new drilling, production and refining capacity now, even though the federal government plans to shut them down within the next 5 to 10 years. That amounts to the “carrot and stick” approach to government, only without the carrot.
On Tuesday, National Climate Advisor Gina McCarthy urged the Big Tech social media giants to actively censor any “negative” messages about renewables and electric vehicles, communicating again this administration’s clear preference for energy notgenerated by oil and gas. McCarthy went so far as to state that disseminating factual information about the limitations of lithium-ion batteries could amount to “disinformation,” which has become a favorite code word for Biden officials.
This is the same Gina McCarthy who in April answered a question about the President’s position on oil drilling by saying : “Let me answer your question very directly: President Biden remains absolutely committed to not moving forward with additional drilling on public lands.”
Also on Tuesday, White House Climate Envoy John Kerry told an interviewer this: “Energy security worry is driving a lot of the thoughts now that oh, we need more drilling of gas, we need more drilling of oil, we need more coal: No, we don’t. We absolutely don’t, and we have to prevent a false narrative from entering into this.”
No one in this administration seems to understand that we can’t have gasoline without first drilling for oil. This really is not complicated.
On Thursday afternoon, White House press secretary Karine Jean-Pierre further confirmed that apparent reality. At one point during her daily press briefing, she had this exchange with Peter Doocy of Fox News:
“Why not just drill more here in the U.S., though?” Doocy asked.
“Because we don’t need to do that,” Jean-Pierre responded. “What we need [oil companies] to do is, with the oil that’s out there, we need them to refine that oil so that the capacity can go up and that prices would go down.”
Ms. Jean-Pierre appeared to read that from her notebook filled with approved administration talking points. That would mean that the Biden administration officially believes that a refining industry currently running at a historically high 94.2% utilization rate (per Biden’s own Energy Information Administration) is actively refusing to process big lakes filled with oil that are just “out there” somewhere.
It is becoming near-impossible for corporations – which pretty much all of these refining companies are – to make major investment decisions in this kind of confusing policy environment. Despite the administration’s apparent belief to the contrary, new drilling projects do not happen overnight. Indeed, the development of a new prospect area requires hundreds of millions of dollars in investments and years of planning and execution before first production can happen.
The expansion of an existing refinery, which ExxonMobilXOM +3.5% and other refining companies are working to achieve currently, is a multi-billion dollar investment that involves years of planning, permitting, construction and painstaking testing before it is ready to turn oil into gasoline and diesel. The building of a new greenfield refinery is most likely not even possible in the U.S. regulatory environment, but even if it were possible it would take a minimum of 7 to 10 years and many billions in capital investment before it could produce even a gallon of gasoline. But of course, Secretary Granholm and presumably the rest of the Biden administration, wants them all to be out of business 10 years from now.
The U.S. oil and gas industry became a dominant force in the global energy picture in large part thanks to what had been until recent years a highly stable and predictable legal and regulatory environment. It is frankly breathtaking how much Biden and his team have done to destroy that stability and predictability in 17 short months.
Though the exact details have not been finalized, Sec. Granholm is apparently planning to hold an “emergency meeting” with senior oil industry executives next week. The CEOs who are invited should first demand that the Secretary clearly state for the public record where she plans for their companies to be in the year 2032. If she gives them the same answer she provided to CNN, the meeting would be a waste of time and the CEOs could save the cost of the airfare, preserve jet fuel, and avoid carbon emissions.
This is simply not sustainable. Then again, that could be the plan.