Biden's Gas Pains

In my last missive from behind the pine curtain for this august writing commune, I bemoaned the state of modern politics and the collection of Keystone Cops we have elected. Honestly, I could write about it every week since, on a daily basis, they spew a veritable Vesuvius of malaprops and goofiness that defies parody. United States Representative Lauren Boebert (R-GED), for example, said this week that if Jesus had owned an AR-15, he wouldn't have been crucified. I'll scan my volumes of C.S. Lewis and get back to you on that one. Or Nancy Pelosi appearing on RuPaul's drag TV show. Yes, that happened. Do any of these people have advisors who have actually been in politics?

But in that piece, I mentioned Democratic campaign strategist James Carville, and his most famous message is our topic this week. He pounded into his 1992 Clinton campaign team one idea, "It's the economy, stupid."

I have very little doubt that despite the Hanna-Barbera cast of Trump administration characters that have been paraded across our screens in the January 6th Committee hearings, the GOP will almost certainly resume control of the Congress in the Fall, and perhaps the White House in 2024. And the reason is simple...inflation.

So, let me talk my Democratic friends off the ledge here. I know it's only one issue in our national cornucopia of problems, but it's the one that matters. The economic cycle hasn't been repealed and it will ebb and flow. If you are unlucky, like Jimmy Carter and George H.W. Bush, you are in office during a trough. If you are lucky like Ronald Reagan and Bill Clinton, you see a parade and get in front hoping people will think you lead it. And despite the fact that the pandemic has slowed to a low boil and business and jobs are picking up again, Joe Biden finds himself in the role of Bush and Carter right now. OK, the role of Bush and Carter's grandad. And like those two, he finds the "Fix the Economy" button has not been installed in the oval office.

The reasons for inflation are also simple. Supply and demand. When there is little of something, and lots of people want it, it gets expensive. When there is a surplus and/or demand slacks off, it goes on sale. It's as predictable as a Fast and Furious movie plot, and yet, we keep being surprised and outraged. This has to be Jimmy/George/Joe's fault right? Well, not really, but make no mistake, they paid and will pay for it anyway.

The price of gas is a good case in point. And part of the Democrat's problem is a lot of misinformation wafting through the interwebs. Biden banned fracking. Biden ordered an end to domestic oil drilling. If the Keystone XL pipeline hadn't been canceled, we'd be fine. We used to be energy independent, but Biden ended that. Biden stopped the sale of oil leases.

Incidentally, none of that is true, in fact, more leases have been granted than under the previous administration. But we have always had a schizoid attitude toward the oil and gas bidness, especially in a big producing state like Texas. During the pandemic, travel and commuting were severely curtailed. Gasoline sales plummeted and the price of a barrel of oil dropped into the negatives. You would have to pay someone to take it. Well, the price at the pump followed suit and we loved it. Did President Trump do that? Of course not, Uncle Corona did, and oil companies were sucking wind. There were layoffs and drilling came to an abrupt halt. In Texas alone, we still have over 100,000 idled wells. More than 27,000 abandoned oil and gas wells sit beneath the Gulf of Mexico, and more than 1,000 oil rigs and platforms are idle. Refineries felt the pinch as well.

Then came vaccines, an election and slowly the economy peeked out of it's zoom meeting and cautiously began to emerge. Suddenly, we were driving, flying, planning vacations. All those things require fuel and the price of a barrel of oil is now where all of us in oil-producing states wanted it to be. But we hate the result of that when it comes to gasoline. So, who is at fault? You could blame oil companies and accuse them of price gouging, but just two years ago, they hemorrhaged capital losing $76 Billion. Over the last 10 years, big oil has lost money 4 out of 10 years. Of course, government subsidies and tax breaks amount to $20-billion a year, but it is still a crap-shoot of sorts.

Here is where we are now compared to then.

US Oil corporations made $174 BILLION in PROFIT last year.

$41 BILLION in PROFIT in Q1 of this year.

On average, the companies made $1.2 billion more with many even doubling their profits when comparing the first quarters of 2022 and 2021. And the summer driving season is beginning and the holidays after that. The next quarters will be even better.

OPEC BASKET PRICE CRUDE OIL PER BBL: March 7, 2022: $126.51

US AVERAGE GASOLINE PRICE PER GALLON:March 7, 2022: $4.22 per gallon

In the last 3 months, the price of crude has dropped 4.6%,while the average price per gallon for gasoline has increased 21.01%

US OPERATIONAL OIL RIGS

June 2020: 341

June 2021: 372

June 2022: 574**

A 54.3% Increase over last year*

A 68.3% increase over two years ago

So, demand is up, prices are up, there is just enough product on the market to keep both those things going, so what exactly is the incentive for big oil or the really big oil in Saudi Arabia to change a thing? Why should they spend money now to increase production, lower prices and slow the money train? There are over 9000 oil leases owned by the big boys that sit unused right now. Oh, production is increasing to meet demand, but not enough to create a glut.

And as hard as it is to sympathize with the Rex Tillersons of the world, I can understand it. Fossil fuels have always been a boom or bust business. When it booms, and you're smart, you stash cash for the next rainy day. Plus, there's a finite amount of the stuff, so if you don't have to drill, baby, drill, why not chill? Biden didn't do anything to stop or slow drilling, in fact he had approved more leases than Trump did in 4 years. He is going to Saudi Arabia to talk with Prince Mohammed Bin Bone Saw, but I predict it will come to naught. Why should they increase drilling either?

Add the boycott of Russia and its Dollar Store Stalin, and it's more profitable to sell it to Europe and Asia. Meanwhile in Texas, we love high oil prices as they fill the state's coffers and create jobs, which enable us to buy motorcycles and bass boats. We also hate high gas prices because we love Chevy Suburbans. But the two are inextricably linked and short of nationalizing the oil business, we will never change that. We can only forget it during an election year in our never ending search to blame somebody, anybody for the capitalism we claim to love. I told you it was schizoid. If it helps, here is what the world is dealing with...

AVERAGE GASOLINE PRICES PER GALLON, IN USD JUNE 13, 2022

United States: $ 5.107

Brazil: $ 5.355

South Korea: $ 6.093

Jordan: $ 6.300

Canada: $ 6.761

Germany: $ 7.650

Italy: $ 8.010

France: $ 8.271

UK: $ 8.385

Yeah, I know, it doesn't really feel better, does it? Well, at least when you nurse your Chevy Volt to the supermarket, you can just relax and shop, right? No, wait, what? Hamburger is $4.55 a pound? It was $3.80 in 2019. We'll tackle that one next week. Here's one hint. Ukraine, before the war, produced more wheat than the United States. What products contain wheat? Oh, most of them.