As Russia perpetrates war crimes against the people of Ukraine, the fossil fuel industries in Colorado and across the country are licking their collective chops and preparing to cash in on the crisis, likely generating yet another round of record profits in adherence to one of the most famous maxims, often attributed to Winston Churchill, “Never let a good crisis go to waste.”
The price of gasoline is high right now. In fact, according to the Wall Street Journal, gasoline hit a record national average of $4.17 a gallon within the past week.
Big Oil is exploiting the Russian invasion of Ukraine and its effects on the price of gas to run up record profits and handsomely reward their shareholders and CEOs by using the American people as their own personal ATMs.
At the end of 2021, BP, Exxon Mobil, Shell, and Chevron all reported the highest profits they’ve seen since 2014, and every single company attributed those record profits to surging oil prices as post-pandemic demand increased and supply had not yet met that demand.
Republican politicians and their backers are doing absolutely everything they can to help these unscrupulous corporations bilk us for every penny while the gettin’s good, and disingenuously trying to lay the blame for the rising price of gasoline at the feet of President Joe Biden and Democrats everywhere, claiming that progressive policies are holding the industry back from unleashing American energy to the world.
Last week, White House Press Secretary Jen Psaki pointed out that U.S. oil companies are sitting on over 9,000 federal drilling permits, claiming that these should be tapped before additional leases are granted. The industry balked, arguing that “developing a lease takes years and substantial effort to determine whether the underlying geology holds commercial quantities of oil and/or gas,” undermining their own point while they’re making it: if it takes so long to produce oil from a new lease, how on earth would issuing new leases have any discernible effect on gas prices today?
The fine print here seems to be that if the Biden administration does away with most or all of the regulations around oil production such as onsite inspection, environmental review, permit approval, and wildlife habitat protection, this could happen more quickly, but as Coloradans who love our public lands, we know that is a terrible idea.
This is all to say nothing of the fact that (much to the chagrin of those who do not want the entire Earth to go up in a climate-change-induced firestorm) Biden issued 900 more drilling permits on public lands in his first year in office than President Trump did in his. Under court order, Biden’s administration also put 80 million acres in the Gulf of Mexico up for auction, marking the largest offshore drilling lease in the country’s history, with a potential to generate 1.1 billion barrels of oil and over 4.2 trillion cubic feet of gas. Curiously, only 1.7 million acres were actually sold, perhaps due to the fact that the entire sale has been embroiled in a back and forth legal battle since its inception.
Fans of the fossil fuel industry also claim that Biden’s day-one revocation of the permit for the Keystone XL oil pipeline extension is impacting gasoline prices, or at the very least would reduce them now if construction were permitted. Not so, only 8% of the extension was completed by the time Biden revoked the permit, and the project wasn’t on track to be completed until 2023 anyway.
When record-high prices coincide with record profits, as they almost always do, it is lunacy to ignore the obvious connection between the two. The simple fact is that when oil prices are high, oil companies make more money. When oil prices are low, they make less money, which means that they have absolutely no incentive to get the price of oil to go lower, and huge financial incentives to get the price to go as high as the market will allow. When the pandemic began and many stopped driving single-occupancy vehicles to work, flying on airplanes, vacationing on cruise ships, or doing any of the other fossil-fuel-powered American activities, the price of oil plummeted and took the price of gasoline down with it.
“Crude oil is about the most perfect example of raw global supply and demand market forces at work you can see,” said Skyler McKinley, regional director of public affairs for AAA. McKinley gave me a crash course in gasoline pricing, and in the course of our fascinating conversation, laid out a simple truth: it’s not irrational for fossil fuel companies to exploit this moment for their own financial gain on the backs of American consumers, in fact, it is essentially their responsibility to do so.
For instance, Occidental Petroleum, now Colorado’s largest oil producer after acquiring Anadarko in 2019, announced in late February that it was increasing its common dividend, which is essentially a piece of the companies profits paid out to shareholders, from $0.04 per share to $0.52 per share annually, an increase of 1,200%. The financially strapped company facing more than $28 billion in debt also plans to buy back $2.5 billion in debt from bondholders. While simultaneously condemning the actions of Russian President Vladimir Putin as “insane and inhumane,” executives told shareholders that they do not intend to increase production in 2022.
While McKinley is right that the price of crude oil, and therefore gasoline, follows the laws of supply and demand relatively reliably, even if Occidental and every other fossil fuel company in the world announced tomorrow that they would be increasing production, consumers wouldn’t see that translate to lower prices at the pump for at least a year, and estimates show that any meaningful price decreases would be a long way off. That’s because taking oil out of the ground and refining it into the gasoline that comes out of the pump is a long, expensive, and complicated process; it’s relatively easy to cease production, it takes quite a lot more effort to ramp it back up and increase the supply, which translates to higher prices in the meantime.
And, yet, this week oil prices took another rollercoaster ride, with West Texas crude dropping 12% on March 9 and Brent crude, the international benchmark, losing 13% in the same day. The price of oil had hit a record-high since 2008 only two days earlier.
Contrary to what Republicans and many of their allies in the fossil fuel industry would like you to believe, which party holds the White House, Congress, the Colorado Governor’s Office or the state legislature has absolutely nothing to do with the price of gasoline. The last time gasoline reached a record high was July 7, 2008, when Texas oil-enthusiast, Republican George W. Bush was president of the United States.
President Barack Obama’s eight years in office saw an average gas price of $2.97 per gallon but dropped as low as $2.14 per gallon toward the end of his time in office. McKinley also made a very interesting point in our conversation, that if any president had more levers at their disposal to reduce the price of gasoline, they would never stop using them and there would be a constant competition to be the president who lowered gas prices the most ever. Consider what a president like Donald Trump would do if he could drive the price of gasoline down just because he wanted to, and shower himself with the credit.
Short of nationalizing the fossil fuel industry, which, if I had to guess, would not be a policy the vast majority of oil and gas executives or Republicans would support, the invisible hand of the market will dictate gasoline prices. Anyone claiming that we can ramp up production right now to have a meaningful effect on gas prices today isn’t telling close to the whole story. More likely, the oil and gas industry is taking this moment to make the point they’re always making, and will always make, that they should have more access to more federal land to drill on whenever it becomes economically advantageous for them to do so and while paying the very minimum in royalties to the taxpayers who own those resources.
In fairness, environmental and clean energy advocates are taking this moment to make the case that if we weren’t so dependent on fossil fuels, to begin with, no matter which hole they come out of, we would be insulated from these price shocks and put ourselves on the path to achieve true American energy independence.
That seems obviously true, and while the prevailing narrative in the media seems to be all about gas prices, advocates should point to the rollercoaster of oil prices, the unscrupulous profiteering of the fossil fuel industry, to say nothing of the worsening dangers of climate change as three very good reasons that America should be investing in a 21st-century clean energy infrastructure instead of trusting that fossil fuel companies and their investors will ever put the country’s best interest over their shareholders’ financial interests.
Ian Silverii is the founder of The Bighorn Company, a dad, a husband, and the former director of ProgressNow Colorado. Follow him on Twitter @iansilverii.
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