How the mighty have fallen. America was on track to be not only energy independent, but energy dominant. Fast forward about a year, and the Biden administration has thrown an anchor around the neck of America’s oil and gas producers, while simultaneously begging OPEC to increase output. What created this ironic predicament?
America has unparalleled potential in the energy industry, but the Biden administration has been openly hostile to reliable energy sources like oil and gas, including banning leases for energy production on federal land. Although a federal judge overturned that ban, there is still uncertainty for the energy industry, and business hates uncertainty.
That judge’s ruling represents a stay of execution, not a change of heart by the administration, which has now appealed the judge’s ruling. To encourage exploration and production, the industry needs to know that the administration has its back — or at least is not trying to stab it.
The ban itself never really made much sense. Democrats and Republicans have historically supported leases for exploration and extraction of oil and gas from federal lands. Former President Obama proudly stated that his support of these leases contributed to an increase in domestic production and decline in energy imports. The idea that this is a right-versus-left issue is a nascent talking point, devoid of even recent historical context.
The ban is also counterproductive to espoused environmentalist goals. Leaving domestic energy sources untapped merely means importing the same resources from abroad, where other nations typically have less stringent environmental regulations and protections. Importing another 2 million barrels of oil a day impoverishes America while enriching others.
Meanwhile, American exports of clean-burning natural gas would decrease by a trillion cubic feet a year. The ban would also dramatically increase demand for coal, which environmentalists supposedly loathe.
Such a ban also threatens American jobs. In 2019, the Bureau of Land Management authorized oil and gas activities that generated 318,000 jobs and $75.8 billion of economic activity. That has been an economic boon to both the states and the nation at large, yielding billions in new tax receipts too. Banning these sources of oil and gas also eliminates the commensurate economic benefits of growth and tax receipts and imposes the cost of unnecessary energy importation.
Yet despite the Biden administration’s ban, which targets the industry here at home, the administration gave the green light to a Russian pipeline. That sounds more like “build Russia back better.” Hamstringing domestic energy leads to importation of an increased production overseas and higher prices here at home.
As West Texas Intermediate (WTI) crude continues its vertiginous climb past $70 a barrel — crossing $75 in recent days — OPEC+ members have had enough sense to increase production and the White House is asking for more. A federal leasing ban does not feel like America First, but America Last.
With the specter of inflation returning, a ban does even more damage because oil is a commodity priced in dollars. While higher energy prices do not cause inflation, they do exacerbate the pain; energy affects every product and service we use, every aspect of our lives, whether we realize it or not. Reducing domestic energy will increase the prices paid by consumers. Energy used in producing products, growing crops, transporting goods, heating and cooling homes and businesses, etc. will be more expensive and the final cost of each of those goods and services will therefore rise.
Given the preponderance of evidence against a ban on leases on federal land, it is unclear why the Biden administration would pursue such a policy. Technologies like horizontal drilling and hydraulic fracturing have been proven for decades and allow a single well pad to traverse miles underground in all directions, greatly increasing the resources collected while preserving the landscape topside. Wells can be, and often are, safely located in the middle of farms or areas of dense wildlife.
The facts in this discussion are squarely in the corner of leases for exploration and extraction. Unfortunately, this administration continues to project hostility to the oil and gas industry, while encouraging imports from the same industry overseas. Until that hypocritical attitude changes, our supply will sit on the sidelines, and our country in second place.