A Strategic Political Petroleum Release

"President Biden knows inflation and gasoline prices are killing Democrats in the polls, and he's scrambling to show he's doing something about it. 

Except he still won't do what would really make a difference: Take his foot off the neck of the U.S. oil and gas industry.

His latest gambit on Thursday was to say he'll release 180 million barrels from the national Strategic Petroleum Reserve in the next six months. This would be the biggest release in history and reduce the reserve to its lowest level since 1984. But the oil will need to be replaced, which will push up future demand.

This is one reason markets responded with a yawn. Crude prices fell a mere 4.9%. Markets don't respond only to short-term demand and supply fluctuations. They also take into account long-term expectations and policy signals. And the Administration continues to signal that its goal is to bankrupt oil and gas producers. But before shooting them, Mr. Biden wants their political help.

The White House underscored Thursday that it wants to "immediately increase supply" while accelerating the "clean energy" transition. The President also said he wants to make companies pay fees on wells from leases that they haven't used in years and on acres of public land that "they are hoarding without producing." But the law already requires companies to produce oil or gas on leases or return their leases to the government.

Producers aren't hoarding land. Many are waiting for government permits for pipelines and rights of way. Some can't find equipment and workers. Yet the Administration vilifies U.S. producers as enemies of the state for making "extraordinary profits and without making additional investment to help with supply" -- even as financial regulators tell banks not to lend for fossil fuels.

Meantime, the Administration is seeking to ease sanctions on America's enemies in Venezuela and Iran, though neither oil producer can compensate for reduced Russian oil exports in the short term. Easing sanctions would merely give their regimes more money to create problems for the U.S. and its allies.

Mr. Biden's rapprochement with Iran's mullahs is further alienating the Saudis and United Arab Emirates, which are already upset by the Administration's lack of support against the Iran-backed Houthis in Yemen. White House press secretary Jen Psaki last month said the President stood by his view during the 2020 campaign that Saudi Arabia should be treated like a "pariah" state.

Is it any surprise the Saudi Crown Prince won't take Mr. Biden's calls? If it's any consolation to our Mideast allies, he treats U.S. oil and gas producers like pariahs too. If the President really wanted to reduce oil prices, he would give a speech announcing a complete halt to his Administration's war on the U.S. industry. Prices might drop $20 per barrel.

He could also strike a deal in Congress to remove regulatory obstacles to U.S. oil and gas production in return for more green-energy spending, as Sen. Joe Manchin (D., W.Va.) has suggested. The 2015 deal between Paul Ryan and Barack Obama to lift the 40-year ban on oil exports in return for extending renewable-energy tax credits provides a template.

But markets are reacting as if they simply don't take Mr. Biden's pleadings seriously. That's a dominant theme across his Presidency, and Americans are paying the price." [1]

1. A Strategic Political Petroleum Release
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 01 Apr 2022: A.18.