The Biden administration exacerbated the inflation of gas prices by both restricting the supply of oil and pressuring banks and asset managers to divest from traditional energy projects. The result of these flawed policies is weakened purchasing power for consumers and more reliance on foreign countries to keep the United States powered.
President Biden is restricting America’s ability to produce its own oil and is instead relying on foreign countries, some of which have governments run by totalitarian regimes, to produce more oil to lower gas prices. Biden’s decision to cut off avenues for more domestic supply of oil by canceling the Keystone XL pipeline and limiting exploration on federal lands and waters gives the Organization of the Petroleum Exporting Countries (OPEC) significant leverage over American energy consumption.
Sen. John Cornyn (R-Texas) hit the nail on the head by stating that, “begging the Saudis to increase production while the White House ties one hand behind the backs of American energy companies is pathetic and embarrassing.”
According to the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers rose 6.2 percent from October 2020 to October 2021. Specifically, energy prices increased by 30 percent in the past year, “its largest 12-month increase since the period ending September 2005.” At the same time, gas prices rose 49.6 percent. Additionally, the Personal Consumption Expenditures Price Index rose by 5 percent from October 2020 to October 2021.
Inflation is eroding purchasing power for low-income households and the Biden administration is seeking to choke off capital to the oil and gas industry, limiting the United States’ energy supply.
In October, Blackstone CEO Stephen Schwarzman stated that part of the reason why energy prices are so high is that financing for fossil fuel companies is “almost impossible” to attain. Moreover, BlackRock CEO Larry Fink also admitted that policies that restrict the “supply of hydrocarbons has created energy inflation” and that it is not transitory — in fact, it may stick around for a long time.
Additionally, Christopher Wood, Global Head of Equity Strategy at Jeffries, told CNBC that the mismatch between demand and supply for energy could get worse. Wood states that the issue is the “oil price is gonna go higher in a fully reopened world because nobody’s investing in oil but the world still consumes fossil fuels.” Wood went so far as to say that in a “fully reopened world, the oil price could go to $150 dollars.”
The rise in prices can be attributed to political pressure from the administration to reel back oil and gas production. Wood claims that the “political attack” on oil and gas “has removed the incentive for investment in the sector despite its lingering importance.”
According to Western Energy Alliance President Kathleen Sgamma, oil and gas producers are unable to access capital, because the Biden administration is “putting so much pressure on banks not to lend to us in the name of climate change.”
State officials from across the United States are fed up with politics seeping into investment decision-making. The Federalist obtained a letter sent by 15 state financial officers threatening to remove $600 billion worth of assets under management by U.S. financial institutions if they continue to discriminate against oil and gas investments. The letter explains how the Biden administration is choking off capital to oil and gas. Specifically, the letter describes how the Treasury Department released guidance for multilateral development banks “to end American financial support for traditional energy production projects in developing countries around the world, likely ceding future development and exploration to Chinese interests.”
Investment discrimination against traditional energy producers could be further worsened if the Biden administration nominates individuals to head agencies opposed to the industry. Although Saule Omarova withdrew her nomination, lawmakers should remain vigilant and ensure any new nominee to head the Office of the Comptroller of the Currency (OCC) does not share her desire to bankrupt traditional energy producers. The new comptroller of the Currency will oversee all nationally chartered banks in the United States, possess voting power on the Financial Stability Oversight Council (FSOC) and could influence the direction of lending by threatening to issue cease and desist orders for actions the OCC views as “an unsafe or unsound practice.”
Earlier this year, Texas enacted a bill to prohibit banks and investment firms that boycott oil and gas investments from receiving state contracts or managing state investments, such as pension and retirement funds for state employees. Other states that follow this model are on the right track to removing political favoritism from finance and preserving the economic security of their municipalities.
Keeping the power on and making sure energy is affordable for all Americans should be the primary objective. Biden and the Democrats’ plan to slowly suffocate the oil and gas industry will make all Americans worse off.
Bryan Bashur is a federal affairs manager at Americans for Tax Reform and executive director of the Shareholder Advocacy Forum.