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The Unregulated Podcast #78: Uncharted Waters

April 7, 2022 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the murky path forward for those advocating for the 25th Amendment and go through some highlights from Capitol Hill over the last week.

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Biden Attacks Oil Producers To Shift Blame On Gas Prices

April 7, 2022 by Leave a Comment

President Joe Biden is expected to call on Congress to pass legislation enacting “use it or lose it” fines on wells that oil companies have leased from the federal government but have not used in years and “on acres of public lands that they are hoarding without producing…Companies that are producing from their leased acres and existing wells will not face higher fees.” The extra fees on federal leased land are on top of rents that the oil companies pay to hold the leases, “bonus bids” paid by the winning bidder at lease sales and the fact that 66 percent of federal leases are currently producing oil.

The Biden administration is clearly continuing its attacks against the oil and gas industry without the appearance of any understanding of its procedures and steps to activate drilling operations. Currently, there are 37,496 onshore leases in effect and 12,068 nonproducing leases. Not all the nonproducing leases will be developed because exploratory work may find that there is insufficient oil and natural gas on them to make them economic.

Once enough oil has been identified, a number of steps must be undertaken. Companies must put together a complete leasehold, particularly with the long horizontal wells that can cut across multiple leases. Sometimes a new lease is needed to combine with existing leases to make a full unit. Since the leasing ban remains in effect with no onshore lease sales held since 2020, some leases are held up, waiting for new leases or for the government to combine them into a formal operational unit. Also, before allowing development on leases, the government conducts environmental analysis under the National Environmental Policy Act, which often takes years to complete, holding up many leases from becoming productive.

Further, many leases are held up in litigation by environmental groups. For example, Western Energy Alliance is in court defending over 2,200 leases, most of which cannot be developed while those cases are ongoing. Some leases are awaiting other government approvals. There are 4,766 permits to drill awaiting approval by the Department of the Interior’s Bureau of Land Management that Biden administration appointees could approve, enabling companies to move forward with development. However, the Biden administration has stalled on its rate of approving drilling permits, cutting back by 75 percent between April and August 2021, and continuing at a much lower level than in the first half of the year. Currently, there are 8,825 outstanding approved permits, but there are factors that cause companies to wait to drill those wells.

First, because rigs are very expensive, companies must build up a sufficient inventory of permits before rigs can be contracted to ensure the permits stay ahead of the rigs. This is a logistical challenge since these are large facilities that must be moved at great difficulty. Besides obtaining drilling permits to drill on federal lands, rights of way must be acquired to access the lease and for natural gas gathering systems, which can take years to acquire. With the pressure against natural gas flaring from regulators, most companies cannot drill before the gathering lines are in place. Pipelines also need to be in place to ship the oil and natural gas, which the Biden administration has worked against, slowing or stopping pipeline infrastructure. The Keystone XL pipeline that President Biden nixed on his first day in office is a case in point. But, there are many other pipelines that are in limbo, waiting permits to proceed from the federal government.

Further, capital must be acquired. Many companies, particularly the small independents who drill the majority of federal wells, are having difficulty acquiring the credit and capital needed. Anti-oil and gas investors, encouraged by the Biden administration’s nominations for key financial positions, have worked to de-bank and de-capitalize the industry. The financiers and investors are saying no to credit because they see the current oil price hike as a short-term problem. In the long-term, they say the Biden administration does not want the oil and gas business, so they have been reluctant to extend credit to an industry President Biden has said he does not want to continue.

Lastly, the regulatory uncertainty from the Biden administration is having the industry prioritize nonfederal leases over federal leases because there is less regulatory and political risk. The Biden administration has an agenda of regulatory overreach with extensive new regulations in the works. The uncertainty of all the new red tape puts a damper on new investment and development on federal lands.

Other Impediments to More Oil Production

There are other issues holding back production. Along with the difficulty of obtaining capital, there are not enough workers to expand rapidly, longer wait times for parts to be fabricated and supplies shipped, steel shortages for tubes that line the well holes, increased costs for the sand needed for hydraulic fracking and worries that the high prices will not last since there has been so much volatility in the oil price range over the past several months.

Sand used for hydraulic fracturing is made of silica crystals processed from pure sandstone, with a small grain size and round shape that allows natural fluids like oil and water to pass between them. At a drilling site, sand is mixed with water and other materials, then injected into the ground at high pressure to break up shale to release and pump out the oil. The sand becomes a proppant through which hydrocarbons flow. That sand now costs between $40 and $45 per ton, nearly 185 percent higher than last year, reflecting among other things increased transportation costs. Two years ago, sand prices were in the teens. While some of the sand used by drillers in Texas and New Mexico is sourced locally, a lot of the sand is shipped in from Wisconsin via rail. Shortages of labor and transportation capacity have complicated drillers’ efforts since at least early February.

The U.S. price for steel, known as oil-country tubular goods hit $2,400 per ton this month, 100 percent higher than a year ago. The price increase is due to increased demand and concern that Russia’s invasion of Ukraine will stop pipe and tube imports from the region. Russia and Ukraine combined provide about 15 percent of all of the imported metal to the United States. Russia also supplies a key ingredient for welded goods, known as coupling stock. Drillers now have less than 4 months of steel supply left for their wells—levels that were last seen in 2008, in the early days of shale drilling.

Source: Bloomberg

The Bakken field in North Dakota could supply as much as 100,000 barrels of additional oil to help ease domestic supply crunches, according to North Dakota’s top oil and gas regulator. Producers have been holding production flat in the Bakken due to ESG pressures and labor shortages. Rig counts have also remained flat due to workforce issues that have made adding rigs difficult.

Economists at the Dallas Federal Reserve project that whatever additional capacity U.S. producers can develop will take a minimum of six months, and that is if everything works perfectly.

Conclusion

President Biden says he wants more domestic oil production but he is doing nothing positive to make that happen. His latest ploy is to place a “use it or lose it” fine on unused oil leases that take years to develop and millions of dollars. A shale well, for example, could cost about $7 million to drill. Oil and gas producers also have to boost wages to find and retain workers. Those higher expenses, along with Biden administration’s tough environmental policy and investors’ pressure to keep costs under control, make producers reluctant to ramp up output. The oil and gas industry is also running into issues with supply chain bottlenecks, as have other industries. As one of America’s most important industries, the oil and gas industry is essential to our economy and—as has been shown with Russia’s invasion of Ukraine—to our national security. While words alone may provide solace for some, it is the continuing negative actions of the Biden administration towards their product that are being heard by the men and women in the oil industry.

*This article was adapted from content originally published by the Institute for Energy Research.

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Biden Tries To Hide Hypocrisy On Mining With Defense Production Act

April 6, 2022 by Leave a Comment

Last week, President Biden invoked the Defense Production Act to increase domestic production of minerals used in making electric vehicles, such as nickel, lithium and cobalt. The president said that the country depended on unreliable foreign sources for many materials necessary for transitioning to the use of renewable energy and reports have stressed this for years. The irony of the situation is that in January, the Biden administration revoked the federal leases for the Twin Metals mine in Minnesota that contains copper, nickel, cobalt, and platinum-group elements. Instead of producing these metals domestically, last June, President Biden indicated that he wants to import them. Yet, now he supposedly changed course, claiming he wants to produce them in the United States.

Biden Administration Attacks Mining Projects

Twin Metals is not the only mine where conflicts to development and production exist. The PolyMet copper and nickel mine is located within Minnesota’s Mesabi Iron Range and would be the first copper-nickel open-pit mine in Minnesota. Besides holding significant deposits, the project has existing rail, roads, utilities and an established supplier network in a traditional mining area but is being held up by court and regulatory action despite having undergone more than a decade of thorough, public environmental reviews.

Ioneer Ltd.’s lithium mine in Nevada, which could supply 22,000 metric tons of lithium annually—enough for about 400,000 electric cars, is being held captive by environmentalists, who claim the mine threatens Tiehm’s buckwheat, a rare flowering plant. The Trump Interior Department had refuted that after an extensive analysis, indicating that the culprit of the buckwheat was hungry squirrels. Despite that analysis, environmentalists asked the Biden administration to list the buckwheat as an endangered species, and Biden regulators subsequently proposed a listing to that effect, placing the mine in limbo.

The Resolution copper mine in Oak Flat, Arizona, which can meet about 25 percent of U.S. copper demand, is currently under federal environmental review. In September 2021, the House Natural Resources committee voted to include language in the reconciliation package to block the building of the Resolution copper mine. The Rosemont copper mine in the northern Santa Rita Mountains in Arizona received a setback when Federal regulators rejected its mining company’s request to reduce critical habitat for jaguars deemed endangered on land that overlaps the footprint of the proposed mine. Hudbay Minerals Inc. has been working for more than a decade to get permission to open the mine that could create thousands of jobs and bring billions in economic development to the region. The mine only needed about 6 percent of the land that had been excluded for the jaguars.

The Pebble copper and gold mine, 100 miles from Bristol Bay, Alaska had its permit application rejected in November 2020 by the U.S. Army Corps of Engineers. In January 2021, the Pebble Partnership requested the Army Corps of Engineers to reverse its denial of the proposed mine’s Clean Water Act dredge and fill permit. According to Northern Dynasty Minerals, the decision is receiving new oversight and is likely to take a year or longer. However, the Environmental Protection Agency indicated that, depending on the outcome in the courts, it would reopen a proposed veto of the Pebble mine, which, if finalized, would effectively block its development on state-owned lands. That process, started under the Obama administration, culminated in a proposed veto of the mine in 2015, before Pebble had even filed a permit application with the Army Corps of Engineers. This was the first time a U.S. mine had been stopped before it could apply for a permit based upon its scientific findings.

Recently, regulators suspended a right-of-way for a road in Alaska, previously granted by the Trump administration, which provided access to one of the world’s largest mineral deposits including zinc and copper. On March 11, the Bureau of Land Management (BLM) notified the Alaska Industrial Development and Export Authority that it suspended a previously issued 50-year right-of-way that covers 25 miles of a proposed 211-mile road connecting the Ambler Mining District to Alaska’s highway system. Biden’s Department of Interior determined that the effects the proposed Ambler Road might have on subsistence uses were not properly evaluated and that tribes were not adequately consulted prior to issuing the right-of-way, despite seven years of such evaluations and consultations. Further, BLM’s right-of-way suspension notice did not identify any specific deficiencies or corrective action plan, which leaves the development authority at a federal roadblock without any indications of what needs to be done or how long it will take to gain access to the Ambler Mining District.

The Defense Production Act

The Defense Production Act gives the president significant emergency authority to control domestic industries for the purpose of national defense. By invoking the Act, Biden is asking the private sector to develop a local supply chain around renewable energy by ensuring the government will pay for some of the costs, such as feasibility studies for new mines. The move supposedly could speed up several new and proposed mining and extracting projects that are in various stages of development. As noted above, however, many of those projects are facing opposition from environmental groups and are further held in limbo by Biden regulators.

The law has been used recently both by President Trump and President Biden. President Trump invoked the act in 2020 to help clear up supply-chain issues encountered in the manufacturing of ventilators and to ensure the production of additional N95 face masks due to the coronavirus pandemic. Biden invoked the act last year to speed up COVID vaccination and testing.

Critical Minerals Security Program

The United States and the 30 other O.E.C.D. member nations of the International Energy Agency recently launched a critical minerals security program that could eventually include steps such as the stockpiling of metals needed for electric vehicles and other renewable energy applications. It is envisioned similar to the commitment by IEA nations since the 1970s to hold strategic stockpiles of oil, which they are now liquidating in response to price increases in world oil markets.

The U.S. Mineral Situation

The United States Geological Survey (USGS) under Biden expanded the list of critical minerals from 35 to 50 by breaking out rare earth minerals and precious group metals into separate entities and adding nickel and zinc to the list. Of the original 35 mineral commodities considered critical to the economic and national security of the country, the United States lacks any domestic production of 14 and is more than 50 percent import-reliant for 31. This import dependence is a problem because it can put supply chains and U.S. companies and mineral users at risk, particularly when China dominates the mineral supply chains, including most of the processing.

Most mining is done in countries with low environmental and labor standards such as cobalt mining in the Republic of the Congo where child labor is used. Half of the Congo’s largest mines are owned by China. China has used its critical mineral resources for political advantage when in 2010, it restricted exports of rare-earth minerals to Japan during a standoff over the Senkaku Islands. China has also encouraged investment in foreign mining projects as part of its Belt and Road initiative to lock up critical minerals, which has enabled China to dominate mineral processing. (See chart below.)

Conclusion

Government climate policies are driving up demand for critical minerals. An electric car includes huge amounts of graphite, copper, nickel, manganese, cobalt and lithium compared to conventional cars. Solar and wind also require more critical minerals than do fossil-fuel plants. For example, a typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a gas-fired power plant. Since 2010, the average amount of minerals needed for a new unit of power generation capacity has increased by 50 percent as the share of renewables has risen.

Last year, President Biden said he wanted to import these critical minerals instead of mining them domestically, despite the United States having the most stringent environmental and labor standards. In his usual contradictory fashion, however, Biden has invoked the Defense Production Act to encourage domestic mining of these critical minerals. However, unless his administration starts approving leases and permits, nothing is going to change. It is just more rhetoric for voters to believe he is accomplishing something.

*This article was adapted from content originally published by the Institute for Energy Research.

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American Energy Alliance Launches Five Figure Digital Campaign to Support American Energy Production

April 5, 2022 by Leave a Comment

The Time is Now for the Administration to Act to Ease the Pain at the Pump

WASHINGTON D.C. (April 5, 2022) This week, American Energy Alliance (AEA), the country’s premier pro-consumer, pro-taxpayer, and free-market energy organization, launched an advocacy initiative calling on President Biden and his administration to stop sending mixed signals when it comes to energy production in America.

American drivers have been paying record-high prices at the pump, but President Biden and the Democrats on Capitol Hill have been sending mixed signals on American energy production – calling for greater oil production only after a year of bashing American oil and natural gas producers. That’s not getting the job done. Now is the time for President Biden to act to support greater domestic energy production here at home to lower the price of gasoline at the pump.

AEA is calling on the Biden Administration and the Democrats in Congress to give American energy consumers a chance to actually lower energy prices for hard-working American families. Our message is clear: it’s time to get out of the way and allow American energy workers to provide the reliable and affordable energy consumers need.

Thomas Pyle, president of the American Energy Alliance, issued the following statement:

“If the Biden administration is serious about lowering energy prices, then it’s time for them to reverse their flawed policies, which have strangled domestic energy production since day one of this presidency.

Instead of stifling investment in oil and gas production, the Biden Administration and Congress needs to encourage financial institutions to invest in new projects.

Instead of banning drilling on federal lands and waters, President Biden needs to encourage new investment in American oil and gas development and approve the over 4,000 drilling permits that his Administration is sitting on.

Instead of promoting policies that prevent the construction of new pipelines, the Biden Administration and Congress needs to clamp down on unelected bureaucrats who are putting up roadblocks to new projects.

Instead of shutting down production in Alaska, the Biden Administration needs to follow the law and offer new leases in ANWR and the Naval Petroleum Reserve-Alaska.

Talk is cheap. Actions speak louder than words. President Biden and Democrats in Congress, it’s time to end your war on American energy. American families are suffering under your policies. It’s time to reverse course.”

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The Unregulated Podcast #77: Words Have Many Meanings

April 1, 2022 by 1 Comment

On this episode of The Unregulated Podcast, Tom Pyle and Mike McKenna discuss the latest rambling proclamations and missteps made by the Biden administration on everything from the war in Ukraine to the Strategic Petroleum Reserve.

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The Biden Administration’s Dishonesty on Domestic Oil Production

March 31, 2022 by 2 Comments

American Energy Alliance’s statement on President Joe Biden’s proposal to release more oil from the Strategic Petroleum Reserve.

WASHINGTON DC (March 31, 2021) Today the Biden administration announced it would release 1 million barrels a day for the next six months from the nation’s Strategic Petroleum Reserve. 

Thomas Pyle, president of the American Energy Alliance, issued the following statement.

“The Biden administration has done everything it possibly can to strangle domestic energy production, and this release from the SPR is not a sustainable plan to reduce prices. The SPR is not a Strategic Price Reserve.  The President is trying to use it to bail out his failed policies. Over the past 10 years, no country in the world put more new oil on the market than the United States.  More domestic production from the largest producer in the world–the US—is the only sustainable path toward bringing down prices.”

While the Biden administration can change course, this would require a 180-degree change from their current approach. The Biden administration claims that “The fact is that there is nothing standing in the way of domestic oil production.” This is not true. According to the latest numbers from the Department of Interior, there are currently:

Not allowing oil production on over 98 percent of federal lands, when the federal government is the largest land manager is a serious impediment to domestic oil production. Not only that, but just this week the Biden administration released a budget with no money to carry out offshore leasing. This would be the third year in a row without offshore leasing.

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The Biden Administration’s Dishonesty on Domestic Oil Production

March 31, 2022 by 3 Comments

Today the Biden administration announced it would “immediately increase supply by doing everything we can to encourage domestic production now.” While the Biden administration can change course, this would require a 180-degree change from their current approach.  

The Biden administration claims that “The fact is that there is nothing standing in the way of domestic oil production.” This is not true. According to the latest numbers from the Department of Interior, there are currently: 

Not allowing oil production on over 98 percent of federal lands, when the federal government is the largest land manager is a serious impediment to domestic oil production. Not only that, but just this week the Biden administration released a budget with no money to carry out offshore leasing. This would be the third year in a row without offshore leasing.  

There is plenty standing in the way of domestic oil production. President Biden is standing in the way of domestic oil production.  

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Democrats Break Biden’s Promise And Work To Raise Energy Prices

March 31, 2022 by Leave a Comment

As American motorists reel from gasoline prices averaging more than $4.20 nationally, it’s important to shine a critical light on so-called climate policies that would drive prices up even higher. Consider for example the provocatively-named “Polluters Pay Climate Fund Act,” originally introduced last August by Senator Chris Van Hollen (D-MD) along with Bernie Sanders and a coalition of other Senate Democrats. The Act would apportion a $500 billion “assessment” over ten years among the largest fossil fuel extractors and refiners operating in the US, according to their estimated contribution to emissions during 2000-2019. The senators claim that their plan would fund the necessary government response to climate change that these large companies helped cause, and moreover that because the assessment is based on past activity, it would have no influence on future production and therefore wouldn’t raise prices for consumers.

Despite the senators’ claims, their proposal makes no sense, whether from the perspective of legal liability or climate policy. Furthermore, if passed the Act would indeed raise gasoline prices for consumers, and on that score would violate President Biden’s campaign pledge to avoid tax hikes on any household earning less than $400,000.

Even on its own terms, the Act makes no sense. The $500 billion “assessment” for emissions over the last twenty years is obviously a number pulled out of a hat. Furthermore, the entire premise behind the Act—namely, that the corporations who have profited the most from fossil fuel emissions should bear the cost of the associated clean-up—is flawed. ExxonMobil, BP, Shell, etc. were not the sole beneficiaries of their oil-and-gas activities. Their customers all participated in the gains, too. The consumers were part of the voluntary process by which major oil companies provided valued goods at reasonable prices. It is economically incorrect to attribute any liability to damages (allegedly) caused by these market activities solely to the supply side, while ignoring the beneficiaries on the demand side.

Van Hollen et al. invoke basic economics to argue that their bill won’t raise gasoline prices for average consumers. As their white paper puts it: “[T]he assessment would not be passed on to consumers. The assessment is based on past, not current, activity, so it does not impact the ongoing costs of production.”

Van Hollen et al. are correct when they claim that a truly one-time wealth transfer—in this case, from particular corporations to the Treasury—shouldn’t affect the future business decisions of those corporations. But there is a glaring problem with this argument: Why in the world would we expect this to be a one-time wealth transfer, with no relevance to current or future production decisions? After all, look at how the Act is justified in the white paper itself: “Congress can generate significant revenue to address our climate challenges by turning to the industry that caused them…Fossil fuel companies have never been held to account for the societal costs of their emissions.”

If ExxonMobil, Chevron, and Shell are today going to be assessed billions of dollars in payments owed to the Treasury because of their “fair share” of emissions from 2000 through 2019, why wouldn’t they expect a future Congress in (say) the year 2030 to assess them billions of dollars for emissions during 2020 through 2029?

Putting aside the nod-and-winking from the sponsoring senators, it is clear that if they succeed in wringing $500 billion out of major oil companies in the name of climate justice, that there is nothing stopping them from going back to the well (pun intended) in the future. They have titled their bill the “Polluters Pay Climate Fund Act”—not the “Polluters Pay Through 2019 Climate Fund Act.” Every decisionmaker at major oil companies would know that their output decisions would likely be retroactively “assessed” down the road. This extra implicit tax would reduce current and future supply, thus raising crude oil and gasoline prices for consumers.

Even the sponsoring senators agree that their $500 billion assessment will cause pain to people who don’t literally write out the checks to the Treasury; namely, to the shareholders of the affected corporations. But in so doing, the senators are implicitly admitting that their proposal would violate Biden’s tax pledge. Although liberal Democrats like to pretend that only blue-blooded fat cats own stock in oil companies, the inconvenient (for them) truth is that tens of millions of regular American households indirectly own shares in oil and natural gas companies through mutual funds and IRAs.

For specific impacts, in a recent study I estimated that in the short run, passage of the PPCFA would lead to a 42 percent drop in earnings to oil and gas shareholders. In the medium term, workers in the oil and gas industry would suffer an 8 percent drop in income. In the long run, as labor and capital adjusted to the new implicit tax, consumers would bear the brunt of it, suffering from gasoline prices that were 40 cents per gallon higher than they would otherwise be.

Senators Van Hollen, Bernie Sanders, and a few other Democrats have proposed a $500 billion grab at Big Pockets. Their plan has no relation to actual numbers coming from climate science, and neither does it make sense as “strict liability” compensation for damages, since it ignores the billions of consumers who also participated in the emissions related to the companies being targeted. Furthermore, the senators are bluffing when they argue that their Act, based on past action, won’t have a chilling effect on future oil and gas production. Of course it would, since its foundational principles apply to future output as well. If passed, the Polluters Pay Act would implicitly tax consumers and hence violate Biden’s campaign pledge.

*This article was adapted from content originally published by the Institute for Energy Research.

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Democrats Inflate Gas Prices With More “Free” Money

March 29, 2022 by Leave a Comment

One of the proposals from California Governor Gavin Newsom to deal with high gasoline prices is to provide rebates to residents who own cars at $400 per registered vehicle, capped at two per person. The proposal would give $400 debit cards to those who own vehicles, as well as millions of dollars to transportation agencies to offer free rides for three months. Gasoline prices in California are the nation’s highest, $5.917 a gallon recently and up more than $2 from a year ago. Part of the high gas price in California are high gasoline taxes. California drivers spend on average about $300 in gas taxes per year. Newsom’s plan also includes a pause, not a suspension, on the increase to the state’s gas tax set to take effect later this year. The proposal would cost $11 billion, with $9 billion to cover the direct payments. The plan also outlines $750 million for transit and rail agencies to offer free transit to residents for three months, and $500 million for projects that promote biking and walking throughout the state.

Other states have gone in a different direction than California in supplying relief to their residents regarding high gas prices. While California lawmakers are against removing the state’s sales tax—one of the highest in the nation—other state lawmakers in Virginia, Maryland, Connecticut, and Georgia have temporarily halted their state’s gas tax, and other states intend to follow their lead soon.

Not to be outdone, the Biden administration considered sending gas cards through the IRS, but Congressional legislators were not in favor. Instead, U.S. House Democrats have introduced three bills that would send Americans payments to offset high gas prices—similar to pandemic stimulus and child tax credit checks. Gasoline is averaging about $4.246 a gallon in the United States. It peaked on March 11 at $4.33 per gallon of regular gas, breaking the previous record of $4.11 from 2008.

House Democrat Proposals

On March 10, Representative Ro Khanna (D-Calif.) and U.S. Senator Sheldon Whitehouse (D-R.I.) introduced the Big Oil Windfall Profits Tax that would tax large oil companies and give that money to Americans as a quarterly payment. The tax would apply to oil companies that produce or import at least 300,000 barrels of oil per day. The tax would be 50 percent of the difference between the current price and pre-pandemic price per barrel of oil. At $120 per barrel of oil, the tax would raise approximately $45 billion per year. Single tax-filers would receive an estimated $240 per year, and joint filers would receive about $360. Eligible recipients would be single filers earning up to $75,000 or joint filers earning up to $150,000.

On March 16, Rep. Peter DeFazio (D-Ore.) introduced the Stop Gas Price Gouging Tax and Rebate Act that would tax oil companies and give that money to Americans as a monthly advance tax credit. Oil companies would pay a one-time 50 percent windfall profit tax on income that exceeds 110 percent of their pre-pandemic income. Single filers who earn up to $75,000 and joint filers who earn up to $150,000 would be eligible.

On March 17, Reps. Mike Thompson (D-Calif.), John Larson (D-Conn.) and Lauren Underwood (D-Ill.) introduced the Gas Rebate Act of 2022, which would give Americans an ‘energy rebate’ of $100 per month, plus $100 for each dependent, for each month the national gas price average exceeds $4 per gallon through 2022. Eligible recipients would be single filers earning up to $75,000 or joint filers earning up to $150,000. None of these proposals tie payments to energy usage or gasoline consumption.

Why the Rebates Make No Sense

The $400 rebate being proposed in California to offset the increase in gasoline prices is a one-time increase in income. But, as income increases, people are willing to spend more, thereby increasing demand for goods and services. When demand increases and supply does not, the imbalance increases prices. Those who receive the handout will be better off, but the rest of the world will have to pay the higher resulting prices for the increase in demand generated by the policy. In this case, the price change may actually be quite small, particularly if few states follow California’s lead, so the policy may not provide much benefit except to the politician who may garner more votes.

But there is a major inconsistency in California’s logic. If California expects to eliminate gasoline and diesel cars by 2035, high gasoline prices are a tool it should want to use to move forward since it will make residents purchase electric vehicles earlier than it would with low gas prices. So Newsom’s rebate is inconsistent with his goals. Newsom wants gasoline to cost a lot in 2035 so that no one uses it, but in 2022 it apparently costs too much so he creates a new handout program.

Further, someone has to pay for the cost of the rebates since there is no such thing as a free lunch. The funds being used to pay for the rebates were originally to be used elsewhere, which results in an opportunity cost. Since government funds come from taxes, in California’s case, residents who do not have cars are subsidizing those that do or if California needs to borrow money for this program, future taxpayers will be footing the bill plus the interest that would accrue.

Who or What Is the Real Culprit?

Like Newsom, President Biden wants to eliminate gasoline and diesel vehicles, but he also wants Democrats to remain in power so he needs to have voters believe he is helping them. But it is Biden’s anti-oil and gas policies that have resulted in high gasoline prices. He is simply following up on promises made during his campaign for president. His policies to cancel the permit on the Keystone XL pipeline, ban oil drilling in ANWR and the Naval Petroleum Reserve-Alaska, put a moratorium on new oil drilling on federal lands, elevate the social cost of carbon used in analyses, and direct banks to fund renewable energy instead of fossil fuel projects have put a damper on U.S. oil production. Those policies had the effect of increasing the cost of gasoline a $1 a gallon before the Russian invasion of Ukraine even began.

If President Biden and House Democrats want to lower gasoline prices, all they would have to do is reverse these Biden policies, rather than beg OPEC to produce more oil, or use ineffective policies like releasing oil from the Strategic Petroleum Reserve or instituting these latest rebate proposals.

Conclusion

President Biden wants Americans to believe that his policies are not responsible for high gas prices. As a result, he and his Democrat-led House of Representatives have several proposals to provide rebates to Americans as does Governor Newsom in California. These rebates have issues in that there is no free gasoline. Someone must pay either now or later. These lawmakers should fess up and tell the American public that they want high gas prices so that Americans will transition to electric vehicles—one of their goals.

*This article was adapted from content originally published by the Institute for Energy Research.

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Which is it, Congress?

March 25, 2022 by Leave a Comment

Many leading voices in Congress ran for office promising to end domestic production of natural gas, oil, & coal.

The DNC’s biggest stars get their sound bites attacking American energy producers. Now that the predictable consequences of their extremist agenda are coming to fruition Pelosi and her cronies are changing their tune.

You can’t have it both ways, Congress.

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