Big Oil is finally exercising restraint and Biden is pissed

This week, the Najah’s Desert Oasis gas station in southeastern California put up a sign of the times. It read: $6.39 for regular.

This remote gas pump isn’t your average fuelling station, to be sure, and even at the best of times, it has the highest gas prices in the country. But breaking the $6 mark is a monumental occasion, even for Najah’s. In California as a whole, the average gas prices are a painful and record-breaking $4.68 per gallon, and the nationwide average for a gallon of regular gasoline is now $3.41 — a whopping $1.29 more than just a year ago. Indeed, inflation rates across the country are at a 31-year high, and Americans are really feeling the squeeze, and many are casting about who to blame for the hardship.

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Although global demand for electricity has bounced back to pre-pandemic levels, global oil production has not -- not by a long shot. In the US, oil production remains 12% lower than in February 2020, right before the impact of the pandemic ripped through oil markets. That’s the equivalent of pulling the US’s entire production in the Gulf of Mexico out of the global economy. And oil and gas production levels have remained low even as the world suffers from an extreme energy crunch and skyrocketing fuel prices. 

And whose fault is it? Depending on who you ask, the answer is either Vladmir Putin and a geopolitical power play on the part of Russia, Joe Biden and his dastardly plan to do away with fossil fuels and suck US coffers dry in the process, or OPEC+ and their stingy refusal to respond to the energy crisis unfolding in Europe, Asia, and (to a lesser extent) the United States. Now, President Joe Biden is pointing the finger at another culprit: the conniving and greedy domestic oil and gas industry. This week the US president asked federal regulators to open an investigation into the US oil and gas industry to determine whether companies are engaging in “illegal conduct” by profiting off of consumers’ pain, citing “mounting evidence of anti-consumer behavior by oil and gas companies.”

“The bottom line is this: gasoline prices at the pump remain high, even though oil and gas companies' costs are declining,” President Biden wrote this week in a letter to FTC chair Lina Khan. “The Federal Trade Commission has authority to consider whether illegal conduct is costing families at the pump. I believe you should do so immediately.”

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Indeed, the price of unfinished gasoline has declined more than 5% over the last month. Typically this decline would be reflected in prices at the pump, but instead, gas station sticker shock continues to intensify across the US.

“This unexplained large gap between the price of unfinished gasoline and the average price of the pump is well-above the pre-pandemic average,” Biden continued, adding that Big Oil is raking in “significant profits off higher energy prices.”

Backing up President Biden’s claims, Bloomberg released a report this week that oil and gas explorers in the United States may point to politics as the reason that they are holding back on upping production to ease oil prices, but the real reason is much simpler: they are making money hand over fist. According to figures from Deloitte LLP, US oil companies are making more money now than at any other point in the entire history of the nation’s shale revolution.

“And this may just be the beginning,” Bloomberg Markets wrote. “Free cash flow, the key metric watched by investors, probably will increase by 38% next year, presuming oil prices remain elevated.”

The American Petroleum Institute has fired back at President Biden in the wake of his plea to the FTC, saying that the move is merely a “distraction from the fundamental shift that is taking place and the ill-advised government decisions that are exacerbating this challenging situation.” A representative of API went on to criticize Biden’s allocation of his time and energy to fight with the domestic oil and gas industry and OPEC+, saying that his attentions would be better spent “encouraging the safe and responsible development of American-made oil and natural gas.”

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