Joe Biden Vs. the Oil Industry — More to Come
Author: Greg Valliere
June 16, 2022
WHAT’S THE PLAN? Biden’s aides worry that gasoline prices will stay near $5 per gallon — or drift even higher — this summer before leveling off by August. The traditional remedies — tapping the Strategic Petroleum Reserve, increasing ethanol in gasoline, etc. — have had little impact.
SO THE WHITE HOUSE has ratcheted up the blame game, with President Biden writing to energy executives that their profit margins are “not acceptable.” That will have no impact on the industry, so other options are under consideration in emergency meetings at the White House this week.
AT THE TOP OF THE LIST is a possible windfall profits tax, supported by Senate Finance Committee Chairman Ron Wyden and other progressive activists. In a plan that’s emerging, revenues from a windfall tax would be used to pay for a temporary pause of the federal gasoline tax of 18 cents per gallon. Wyden wants a 21% tax on oil industry profits to pay for the holiday.
MOST DEMOCRATS ARE WILLING TO CONSIDER THIS PLAN, but it clearly doesn’t have the 60 Senate votes necessary to break a filibuster. Virtually all of the 50 Senate Republicans would vote against it, and a handful of Democrats — led by Sen. Joe Manchin — would oppose it also.
DEMOCRATS KNOW THIS, but they believe they have a potent issue for the fall elections — the oil industry, they will contend, is exploiting a crisis. But it’s more complicated than that because of the issue of refinery capacity.
BIDEN’S OWN REGULATIONS are a major reason refinery capacity hasn’t increased. A year ago he imposed new regulations curbing exploration and refining as part of the ferocious war against fossil fuels launched by activists in his administration. It was quite clear that Biden and his aides wanted to phase out fossil fuels — but now they want the industry to increase production.
THE FOSSIL FUEL INDUSTRY has little interest in committing resources to new exploration and production of oil, coal and natural gas. Industry officials would rather sit on the sidelines, paying higher dividends to shareholders, earning interest on assets in the bank or in the ground, while enjoying the huge run-up in energy prices. They can’t be forced to drill.
BIDEN SAID LAST WEEK that his administration is prepared to use “all reasonable and appropriate Federal Government tools and emergency authorities to increase refinery capacity and output in the near term.” But then he added: “Exxon made more money than God this year.”
SO THE INDUSTRY MAY FACE HEADLINE RISK for comments like that, but there’s virtually no chance that Congress has the votes to change policy on drilling or refining. Biden may visit Saudi Arabia (the trip is all about oil, despite White House denials), and he may embrace a windfall profits tax and rebates in the next few weeks.
BUT WITH THE WAR IN UKRAINE not close to resolution, the pressure will be upward on energy prices — and the industry’s enemies in Washington simply don’t have the votes to do anything about it.
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