Crude oil prices dropping … so what?
The price of crude oil on the world market has dropped recently. It has dropped from approximately $120 per barrel to under $100 for the first time since late February.
Oil prices are among the more enigmatic of the commodity markets – largely because they are not entirely based on free-market supply and demand. Both international and domestic politics play a significant role. The free-market aspect rests on the fact that some countries need to buy oil on the international market – and the countries that possess lots of oil need the money to maintain their economies.
However, there is still a lot of room for political considerations in setting prices and controlling the flow of oil onto the market.
For the United States, domestic politics plays an incredibly significant role in the accessing and marketing of oil and gas. When folks claim that the President of the United States has very little influence over the price of oil – or the pump price of gasoline – they are not telling the truth.
A president may have limited power to influence the price of crude on the international market, but a lot to do with domestic retail prices of gasoline and natural gas.
The price of natural gas and fuel oil – specially gasoline – is impacted by taxes. It is one of the most taxed retail products – alongside tobacco. Gasoline, for example, is taxed at every level of government.
Presidents can influence the pump price by releasing oil from the national reserves – although that action has limited benefits.
Presidents have a number of ways of controlling exploration, drilling, refining, shipping and retail sales. There is a raging controversy over the fact that America shifted back to a net importing nation after a brief period as a net exporting nation in the last year of the Trump administration.
Apart from the partisan finger-pointing, it can be said without fear of refutation that President Biden initiated an anti-fossil fuel agenda as a key component of his Green New Deal policies. He had declared his intention during the presidential campaign – and he acted upon those promises in the first days of his administration.
Biden canceled the completion of the Keystone Pipeline. He banned and severely restricted drilling on public lands and territorial waters. He limited authorization of drilling on private lands – and the construction of necessary pipelines to transfer drilled oil to refineries from drilling sites.
The White House keeps pointing to nine thousand certifications for drilling that are not yet being used by the oil industry – suggesting that the industry, itself, is holding back for higher profits.
Many of those certificates are for sites that are weak prospects for sufficient oil to cover the cost of drilling. Others represent multiple drilling sites for the same prospective underground oil resource. And finally, there can be no drilling if there are no pipelines to move the oil from the well to the refinery.
In addition, the left-wingers that influence Biden on oil policy are adamantly opposed to fracking. Yet the reserves America has in shale oil would make America the number one oil producer in the world. One area the United States can influence world oil prices is to become a major exporter. A flood of oil on the world market would drive down prices. It is one area in which supply-and-demand works well. Fewer dollars chasing more oil and prices fall. That would also mean no dependency on Russian … Venezuelan .. Irani … or Saudi oil. That would be an especially critical blow to the Russian economy – which is dependent on oil sales to keep its economy from collapsing.
Increases in oil prices is the number one factor in inflation. Every part of the American and the world economy depends on the price of fuel. It is incorporated into our homes, our jobs, and every product and service we purchase. Nothing happens without oil – not even electricity. Oil is basic to the cost of producing electricity. It is in the cost of the construction, operation and maintenance of those wind turbines … in the manufacturing, installation and maintenance of those solar panels.
The left’s mission of operating without fossil fuel in a few years is nothing more than a political wet dream.
The cost of crude may be falling now, but it is just as likely to increase again. You may recall that oil prices took a brief dip in November of 2021.
Part of the decline is the drop in usage as motorists are adjusting to the soaring prices by using the car less. I am personally trying to reduce my own consumption of gasoline by 20 to 30 percent. I reduce the number of “nights out.” I consolidate my errands into a single trip—five places in one trip yesterday. And I walk (about a mile) to the nearby mall that I habitually drove to in the past.
To the extent that Biden can negotiate the purchase of oil from Venezuela or Iran, he may be able to drop the price of crude a bit – and ergo the pump price for American consumers. BUT … at what price? We would be shifting America’s oil dependency from one adversary to another. It is already putting pressure on Biden to give Iran a sweetheart nuclear deal – including the lifting of sanctions – in return for their oil. Enriching a terrorist state is not America’s only poor policy choice.
We are officially at odds with the Maduro government in Venezuela. Remember how we favored the overthrow of dictator Nicolás Maduro by Juan Guaidó. We seemed to have walked away and lost that battle, too. Now we are begging for oil from a despot we wanted to toss out.
The current drop in the price of crude oil is a temporary anomaly. What we need to understand is that the price we pay at the pump is greatly influenced by politics – international and domestic. At this moment, Biden and the Democrats are putting their fantastical Green New Deal against America’s necessary reliance on oil.
For the time being, we need to have Washington do everything conceivable to produce as much domestic oil as possible. Every additional barrel means lower prices and greater security for the United States.
So, there ‘tis.