When All Else Fails, Moan About Oil Companies
White House Chief of Staff, Ronald Klain, posted this Tweet.
“Prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up.” pic.twitter.com/9z5atKjjab
— Jeff Zients (@WHCOS) November 17, 2021
Rather than look in a mirror to see an obvious problem, Biden Asks FTC to Examine Oil, Gas Companies’ Role in High Gasoline Prices.
Biden moans “Prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up.”
He then asks the FTC to “immediately” investigate whether “illegal conduct is costing families at the pump.
Biden cites notes than “in the last month the price of unfinished gasoline is down 5% while gas at the pump is up 3%.”
Biden’s Conclusion
“I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal contact.”
“I therefore ask that the commission further examine what is happening with the oil and gas markets, and you bring all of the Commission’s tools to bear if you uncover any wrongdoing,” said Biden in the ending paragraph of his letter.
Letter Translation
Hello FTC, my polls are sagging and inflation is soaring. What can you do to help?
The WSJ noted these tidbits.
Mr. Biden has faced criticism from environmental activists for pushing OPEC to pump more oil. The activists say that the efforts conflict with his longer-term commitment to reduce U.S. greenhouse-gas emissions and wean the country off fossil fuels.
Mr. Biden’s letter comes after National Economic Council Director Brian Deese urged Ms. Khan in August to look into “divergences between oil prices and the cost of gasoline at the pump.”
In response, Ms. Khan said the commission would examine potential unlawful business practices in the oil and gas markets. She said she would take steps to deter unlawful mergers in the industry, “identify additional legal theories” to challenge retail fuel station mergers that allow large companies to buy family-run businesses, and investigate alleged abuses in the franchise market.
Just what we don’t need from this administration: “additional legal theories“.
Mirror, Mirror, on the Wall
Is Biden really this economically illiterate or is his letter a futile political statement?
The answer, of course, is that it’s both.
For starters, prices do not act immediately. Second, Biden allows no possibility of increased refining costs.
Did the labor costs, transportation costs, insurance costs, and the cost of chemicals used in refining go up more than the unrefined input costs went down?
Letter Deeply Hypocritical As Well
In addition to proving his economic illiteracy, Biden’s letter is deeply hypocritical.
He ought to be happy with rising prices. The faster and greater gas prices rise and stay high, the quicker consumers will be willing to purchase electric vehicles.
But no. Biden has a clear goal of shutting down the oil and gas industry then moans about the result.
The Irony of the Day
The irony of the day on November 8, was Energy Secretary Asks OPEC to Pump More Oil
The industry’s response, and a very logical one, oil was to halt exploration and capital development including drilling new wells.
Need for a Scapegoat
Three rounds of free money stimulus (one under Trump, two under Biden), increased demands for nearly everything from chemicals to transportation costs.
Rather than blame his own inept policies, (and that of the Fed), Biden turns to the worn out tactic of blaming the industry for price gouging.
He desperately needs a scapegoat and his letter screams of the reason to those who can properly read between the lines.
Today, Senator Joe Manchin raised fresh concerns over inflation, citing both Build Back Better and the Fed.
Biden needs to deflect attention somewhere, thus the letter to the FTC.
For discussion, please see Manchin Raises New Inflation Concerns, Dear Joe, Just Kill It
Thanks for Tuning In!
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Mish
in a video conference with the Nation Academy of Science’s Space Studies Board
Elon Mush said some very pertinent things about energy. He was asked what he
saw for energy production and he said that the US is a very energy-intensive
civilization but all its energy needs could be met with a square of 150 miles
each side of solar panels yielding 20% efficiency. That with battery packs
using iron cathodes and lithium would take care of all our needs. Obviously
there are things like transmission and so but that is just engineering. He let
slip that Texas would be a nice place to put it so maybe I should be looking to
buy some really cheap till-now useless land there. I think I can trust his figures. His track
record is very good in that area. He did sell a good chunk of stock recently. Maybe he wants to buy something.
stuff. I am turning around different scenarios in my mind to see what could put
a damper on the sector. From a purely economic point of view it is clear
sailing but unfortunately we have a very unpopular president with midterms
coming up and he has to do something big soon. The tobacco story is very
appropriate in the sense that tobacco, like oil, is an addictive product which
has by government action been discouraged from spending money. Tobacco companies
spent a hell of a lot on advertising and then they had to stop. Oil companies
spent a lot on exploration and now they stopped. Cash flow explodes and as long
as prices are high they are happy. Addictive products and services are the best
investments as long as they don’t get sin-taxed to death. CO2 is sin-taxed now
so I see additional taxes for the oil sector too. Tax oil and subvention
renewables and to hell with the economic logic of it all is not going away soon
and superprofits from an “evil” product is an easy sell to many
people favored by a party which I dare not say the name.
anti-competitive or otherwise potentially illegal contact.””
“Frigid European and Asian winters will mean there is insufficient gas available to meet demand, said Massimo Di-Odoardo, vice president, gas and LNG research, at Wood Mackenzie.
“A cold European winter could boost heating demand up to 20 billion cubic metres, while a cold Asian winter could add up to 10.5 bcm of LNG demand across China, Japan, South Korea and Taiwan. This would take 10.5 bcm in LNG imports away from the European market,” Di-Odoardo said in a report.”
“But Wald warns that renewable energy cannot currently reliably power our technology-driven lifestyles, especially if some of it’s dependent on winds blowing.
“This means a major step back in the quality of life for Western countries that will be incredibly difficult, maybe impossible, to sell to people accustomed to a certain lifestyle,” Wald said.”
“SINGAPORE (Bloomberg) – Spot freight rates for liquefied natural gas tankers in the Asia-Pacific have surged to record highs as a steady flow of U.S. cargoes to the region boosts demand for ships.
The cost of chartering a vessel to carry a shipment of the super-chilled fuel from Australia to Japan spiked to $316,750 per day on Tuesday, five times higher than two months ago, according to data from Spark Commodities. That beats the previous high in January during a cold snap in Northeast Asia.
The jump comes in the run-up to the peak winter consumption season and is spurring concern among Asian buyers that colder-than-normal temperatures could be exacerbated by the shortage of ships, pushing costs of the electricity feedstock even higher.”
link to channelnewsasia.com
“We are thoroughly reviewing the U.S. request, but we do not release oil reserves because of rising oil prices. We could release oil reserves in case of supply imbalance, but not to respond to rising oil prices,” the industry ministry official told Reuters.
South Korea’s current petroleum stockpile reserves stand at 97 million barrels, enough for 106 days, according to the ministry official.
Reuters reported that the Biden administration has asked some of the world’s largest oil consuming nations to consider releasing some of their crude reserves in a coordinated effort to lower prices and stimulate the economic recovery.”
link to energyintel.com
He said annual upstream investment had fallen from about $400 billion in 2012-16 to around $260 billion now. This could be damaging for an industry which has investment cycles of 15 to 30 years, he added.”
prices rise and stay high, the quicker consumers will be willing to
purchase electric vehicles. “
“Speaking at a meeting of the Valdai discussion club in Sochi late on Thursday, Putin said “there will be a moment similar to today’s situation, when the market demands [more oil] but there will be nowhere to get it from.”
He said annual upstream investment had fallen from about $400 billion in 2012-16 to around $260 billion now. This could be damaging for an industry which has investment cycles of 15 to 30 years, he added.”
For starters, prices do not act immediately. Second, Biden allows no possibility of increased refining costs.
Did the labor costs, transportation costs, insurance costs, and the cost of chemicals used in refining go up more than the unrefined input costs went down?