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This has been a week when a rift seemed to develop among globalist political leaders regarding the “incredible” energy transition agenda. It’s a rift that once again shows us that political elites who don’t have to suffer the consequences of their own policy actions are the wrong class of people to be in charge of making energy-related decisions for the masses.
A Question Of “Delusional” Investments
As U.S. President Joe Biden was calling on top U.S. refining companies to offer suggestions about how to quickly increase domestic gasoline production this week, UN Secretary General Antonio Guterres was slamming any such actions, calling any further investments in oil and gas “delusional.” In a speech delivered to the Austrian World Summit in Vienna on Tuesday, Guterres doubled down one more time on the narrative that the only cure for the world’s current major energy crisis is the investment of more trillions of dollars in government subsidies for the rent-seeking renewables industries.
“The energy crisis exacerbated by the war in Ukraine has seen a perilous doubling down on fossil fuels by the major economies,” he said. “The war has reinforced an abject lesson: our energy mix is broken. Had we invested massively in renewable energy in the past, we should not be so dramatically at the mercy of the instability of fossil fuel markets now.”
That rhetoric, coming yet again from one of the array of globalist leaders who have made the energy policy decisions that have delivered the U.S., Europe and much of the rest of the world into the most severe energy crisis in modern times, is highly predictable and flies in the face of Biden’s decision to call for more domestic gasoline to surge onto the U.S. market.
Not that Biden hasn’t been on board the energy transition train all along, of course. This is the same President Joe Biden who, just a couple of weeks ago, advised consumers complaining about high prices for gas at the pump to be thankful for their situation, since it was all just a necessary part of the energy transition he and other globalist decision makers are trying to effect. “[When] it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over,” Biden said.
As if to reinforce his tone-deafness on the matter, Biden’s staff issued a tweet in the President’s name late Wednesday doubling down on the “incredible transition” rhetoric again:
But that’s the “green economy of the future,” which may or may not ever actually come about (odds do not seem to be in its favor). The energy crisis that is a very real thing today still cries out for some near-term solutions, and those solutions have nothing to do with “investing” trillions more in debt-funded subsidies for renewables, and everything to do with private sector investments in oil and gas exploration, drilling, pipelines and refineries. You know, all those things that the UN Secretary General says are “delusional.”
But the Secretary General’s view is apparently having little influence on the administration, at least for this week. Hours after the President’s letter was released, White House Press Secretary Karine Jean-Pierre said during a briefing that Biden is open to using the Cold War-era Defense Production Act to increase gasoline output “and lower costs at the pump. Already, the President has demonstrated his willingness to use that emergency powers to lower costs for families,” Jean-Pierre said, in response to a question about using the law to expand refining capacity. “We’re saying that the President has used it before and he’s willing to do that again.”
Things Are Not So Simple In The Real World
But the American Fuel & Petrochemical Manufacturers (AFPM) points out that, in the pesky real world, things are not so simple in the refining business. “Lost capacity cannot be restored with the flip of a switch,” AFPM said. “We don’t just have 1.1 million barrels of daily capacity sitting there idle and ready to go back into production. More than half of the refining capacity lost in the United States over the past couple years is in the process of being transitioned to full-time renewable fuel production or it’s being dismantled.
“Even if that wasn’t the case,” AFPM continued, “reopening a refinery is a major effort. It would require significant lead time to inspect machinery and attain necessary operating permits. Staff would need to be reassembled and/or recruited and trained. And the facilities themselves would need to be reintegrated with supply chains. A hypothetical restart is not a quick-turn project, and the investment cannot be based on short-term data.”
Chevron, one of the refiners targeted by Biden’s letter, agrees. “Our refineries are running full out,” Bruce Niemeyer, corporate vice president of strategy and sustainability at Chevron
Despite the high utilization rates, no major company is currently planning to build a new refinery in the U.S. Fox Business quotes Chevron CEO Mike Wirth as saying he does not expect another oil refinery to be built in the U.S. ever again, pointing to decades of federal government policies as the reason why. “There hasn’t been a refinery built in this country since the 1970s,” Wirth said at Bernstein’s Strategic Decisions Conference this week. “I personally don’t believe there will be a new petroleum refinery ever built in this country again.”
“Capacity is added by de-bottlenecking existing units by investing in existing refineries,” he explained. “But what we’ve seen over the last two years are shutdowns. We’ve seen refineries closed. We’ve seen units come down. We’ve seen refineries being repurposed to become bio refineries. And we live in a world where the policy, the stated policy of the U.S. government is to reduce demand for the products that refiners produce. At every level of the system, the policy of our government is to reduce demand, and so it’s very hard in a business where investments have a payout period of a decade or more.”
To put it more succinctly, Wirth is just pointing out the obvious: Government policies designed to put refineries out of business have been successful in putting refineries out of business. This really is not that complicated.
Over that same five-year period, Spitler pointed out that the company’s combined earnings totaled $55 billion, and that Exxon’s global capital investments in new supplies totaled $118 billion. So, when a company has been reinvesting twice its net income in the finding and producing of new resources, has it really been making “windfall profits,” as many Democrats in congress and the Biden administration claim?
Spitler’s email concludes with a suggestion that “government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines.” That is a clear reference to the counterproductive orders Biden issued on his very first day in office to cancel the Keystone XL pipeline project and suspend the federal oil and gas leasing program, which remains effectively suspended by Biden’s Interior Secretary Deb Haaland today despite a federal court order issued a year ago to revive it.
Secretary General Guterres no doubt took great comfort in Biden’s Day 1 actions, as he has likely taken comfort in basically every action Biden and his appointees have taken related to energy policy since then, given that all have been designed to harm and hamper new investments in fossil fuel energy he deems to be “delusional.”
Pain At The Pump Creates Political Pain At The Ballot Box
But American consumers have increasingly been making the connection between the policies behind the “incredible” energy transition narrative and the fact that they must pay more to fill up their gas tank every time they stop at the local station. That financial pain at the pump is starting to create severe political pain for Democrats at the ballot box, as evidenced Tuesday by a Republican, Mayra Flores, winning Texas congressional district 34 for the first time in 150 years.
Make no mistake about it: That political pain, directly tied to his pursuit of these “incredible transition” policy actions, is why Biden suddenly seems at odds with Guterres and his globalist narrative. Sticking to that narrative is far easier for the Secretary General, since he is not accountable to the little people who must foot the bill for their own energy needs.
In the end, what all this week’s contradictory messaging from political types proves is that we have the wrong class of people making all these energy policy decisions for everyone else. Political elites never really solve any problem, but their efforts to intervene in and control markets sure can make them much worse.