In the least surprising energy policy development in recent years, the Biden administration has proposed a five-year (2024-2029) offshore oil and gas leasing program that offers the smallest number of offshore lease sales in the history of the program — just three sales!
Biden’s draft leasing program blocks leasing off the Alaskan coast, and in both the Atlantic and Pacific Oceans. The administration is in fact proud of this obstruction of private-sector investment in the national wealth embodied in fossil energy resources located in federal waters.
The proposed leasing program will be aligned with the administration’s policy of “net-zero [U.S. greenhouse] emissions by 2050” while meeting legal requirements “for future offshore renewable energy leasing … ensuring continued progress towards the administration’s goal of 30 gigawatts of offshore wind by 2030 [while] protect[ing] against the potential for environmental damage.”
In apparent belief that the U.S. oil market is independent of the global market, the administration has forgotten that less domestic oil production only means more production overseas. After all, the administration’s net-zero climate obsession does not affect global demand for petroleum products. And notwithstanding the Biden administration’s fantasies, demand for oil and gas are virtually certain to increase over the next few decades.
Another unsurprising but extremely telling development is that the administration, desperate to avoid the adverse price effects of its policies, now simultaneously agreed to ease sanctions against the Venezuelan oil industry. Note that the consumption of Venezuela’s sour crude oil emits more than four times as much greenhouse gas as Gulf of Mexico crude oil from U.S. producers. Oops!
If we apply the EPA climate model under assumptions that exaggerate the future effects of emissions cuts, the Biden policy would reduce global temperatures in 2100 by just 0.173 degrees Celsius — an effect that would be barely detectable.
Fossil energy resources are a form of national wealth. Policies designed to constrain domestic output artificially while expanding overseas production create an explicit transfer of wealth from Americans to such overseas producers as Venezuela, Iran, and Russia.
It is not merely the shareholders and employees of fossil producers who are among the losers. Offshore leasing revenues are shared with states and localities, funding significant programs in education and conservation. The administration’s assertion that a sharp expansion of offshore wind electric capacity will “protect against the potential for environmental damage” is political propaganda, as it shunts aside the adverse effects of offshore (and onshore) wind power in terms of wildlife destruction, heavy metal pollution, massive landfill capacity problems, noise, and the like.
And for what? Because current prices for natural resources reflect expectations about future prices, the Biden administration’s assault on domestic production of conventional energy has the effect of reducing expected future global output, thus raising prices today, regardless of the time lag between current leasing policies and the attendant decline in future output.
The Biden offshore leasing proposal is perverse. It will raise prices now and over the long term. It will transfer wealth from Americans to odious regimes overseas, including that of Vladimir Putin. It will increase the emissions of various pollutants and greenhouse gases while yielding no measurable effect on future climate phenomena, even as it engenders massive environmental damage in other dimensions.
Such are the fruits of a purely ideological energy policy that doesn’t take reality into account.
Benjamin Zycher is a senior fellow at the American Enterprise Institute.