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Crude oil prices dropping … so what?

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.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry HoristLarry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.

14 Comments

  1. Larry kuhn

    It means nothing. We will never be energy independent with a cognitive failing president

    • Frank stetson

      We weren’t oil independent with Trump either.

      We did reach a net exporter status, but that is not energy independent, plus, we only had that status for one year and that was due to a pandemic downturn in demand, not an over abundance of production. Just another lie that Trump put out there and folks like you and Larry believe.

      Plus, if you truly wanna be energy independent, then you’re looking at renewable sources such as sun, wind, and waves. That would be the ballsy move the Biden is attempting.

      • Miles collins

        What?????? You’re a moron. We were even exporting energy during the great Trump years.

        • Frank stetson

          The term was “net exporter.”

          And yet you had to call me a moron because you can’t read.

          How’s that shoe leather taste?

          • Miles collins

            I read what you posted. You’re busted and are trying to smooth it over.

  2. Frank sTetson

    Well, you just can’t fix stupid.

    The US has always exported oil. The US has always imported oil. In 2020, under Trump, we became a net exporter. The reason for that was a decreased demand due to the pandemic. Therefore, we still used all of our own oil but did not have to import as much the we became a net exporter. But our production levels fell in 2019, 2020, and remain lower than 2018 even in 2021 as well.

    Your comment was that we are even exporting energy during the Trump years. Well I’m not sure what that means is in comparison to what I was saying.

    If you can explain what I am busted for I would be glad to own up for it. But at this point I don’t have a freaking clue what you’re talking about. And what you said even if true it’s just a stupid. And almost any given year we both import and export energy; the only question is how often are the event that exporters Azim sell more than we buy.

    • Richardfrom ca

      This is just another ploy by the socialistic liberal agenda that
      has infected this country. If they get the price down low enough
      it’s not cost efficient to produce causing the producers
      to have to shut down. That is this administrations intent. That’s
      how they intend to make the US buy into their new green deal.
      I don’t know about the rest of you but I don’t have 60 grand laying
      around to buy one of their electric vehicles. What most of the idiotic liberals don’t think about is it still takes oil to make the bodies, tires and other essentials for these green vehicles not to mention creating power to charge them. What about battery disposal when these batteries fail, and they will fail. Where will they go? Into a landfill somewhere? Take the time to do your homework and actually see what these socialist are trying to do to our country, turn it into some euro-trash nation so Hunter can run amuck and do more coke off prostitutes asses and make more money from his CCP buddies with his dad.

    • Joe Gilbertson

      Oil production peaked in 2020 and declined under Biden. Get your facts straight.

      • Frank stetson

        Actually, I was wrong. US crude oil production peaked in 2019; fell in 2020 under Trump, and again in 2021 under Biden. I think the Trump slump was about 10%; Biden’s drop was minuscule, almost flatlined.

        That’s the EIA results. Want link?

  3. MikefromTexas

    I’d say continue the pipeline and the heck with the FEDS.

  4. Frank stetson

    Whatever do you expect to get from this play flies?

    And is that really worth the risk?

    As far as I know it was to carry Canadian oil to Texas refineries in order to ship most of it to the rest of world. I am not sure how that helps the US gain energy independence?

    • Poorgrandchildren

      It’s called the law of supply and demand. When the supply of anything available in the world increases, and the demand remains constant, prices drop.

  5. Poorgrandchildren

    Democrats are notorious for promoting stupid and even crazy solutions to real and imagined problems. Some police are bad and sometimes guns are used for bad purposes, so they propose to defund the police, disarm law-abiding citizens, and somehow give the then-nonexistent Gestapo a monopoly on guns. Some transgender children are bullied, so they propose to allow biological males to compete against biological females (Goodbye Title 9). Sometimes there’s a pipeline spill, so they want to stop pipeline construction. That way, oil can be carried by ships which sometimes cause major spills. Sometimes they don’t win elections under the current rules, so they propose to eliminate the Electoral College so Californication and New York can choose our next administration. There’s been a warming trend since the 1700’s, and they have no control over fluctuations in the Sun’s energy output, so they propose to increase governmental power over us. And they want to replace fossil fuel with electric “green energy” that is more harmful than oil to produce and dispose of the wastes. Stupid, stupid, stupid. Or, batshit crazy.

    • Poorgrandchildren

      Oh! These mental midgets also noticed that some people work harder and smarter than others and fare better financially than others so they want to replace the American Dream (freedom to try to achieve income inequality) with socialism. That plan nearly exterminated some early American settlers and has brought poverty to millions.