Erickson: When Oil Hit Its Record High in 2008, President Bush Knew Exactly What Had to Be Done
In 2020, Joe Biden declared war on oil and gas in America. In a Democratic primary debate, he declared, “No more subsidies for the fossil fuel industry. No more drilling, including offshore. No ability for the oil industry to continue to drill, period. It ends.” High gas prices are all part of his plan.
The other day, now-President Biden insisted that his administration had done nothing to raise prices or restrict drilling. Actually, there have been plenty of regulatory measures taken and offshore leases curtailed as part of Biden’s war on fossil fuels.
If you were an investor, would you invest in a company the president of the United States had promised to target? The Biden administration’s posture has been squarely against the oil and gas industry, which has fostered uncertainty in the market and disincentivized further investment. It has coupled this with regulatory gusto and a refusal to fight Obama-appointed activist judges using climate change as an excuse to shut down offshore oil drilling.
In a strange bit of optics, as the president suspended Russian oil imports last week, he also requested $2.6 billion to promote “gender equality” globally. He’s causing energy price spikes and wasting billions on nonsense. Now he wants to blame the Russian oil imports for high gas prices, which were high before the ban.
Biden has also noted that the U.S. produced more oil in his first year than in former President Donald Trump’s first year.
That is a sleight of hand. Trump’s first year was preceded by the oil-hostile Obama administration. Trump got oil flowing again onshore and offshore. His second year outpaced Biden’s first year. In fact, the last three years of Trump’s tenure each saw more oil produced than Biden’s first year. In other words, oil production fell once Biden got in office.
But there is something else. The price of oil hit $147.90 on July 14, 2008. That was and remains the record high. But it plunged the next day. By the end of that week, oil prices were down 12 percent. By November, oil was back to $30 a barrel.
What caused the plunge on July 15, 2008? President George W. Bush announced he was authorizing offshore oil exploration. That’s it. That’s the only thing that happened. News outlets said it would amount to nothing. The Obama campaign dismissed it as a stunt. It directly caused the price of oil to start declining.
Why? Because oil is bought in a futures market, not a present market. The market responded to the information that more American oil would be coming by sending prices down.
The U.S. now has larger oil reserves than either Russia or Saudi Arabia. According to a 2016 report in the Los Angeles Times, “The U.S. is sitting on 264 billion barrels, 8 billion barrels more than Russia and 52 billion more than Saudi Arabia.”
If Biden were to commit to tapping our oil reserves and expanding domestic energy production, oil markets would respond rapidly, just as they did in 2008.
Instead, even now, his administration dogmatically demands Americans switch to electric vehicles and get off fossil fuels. His administration continually signals that it will put the fossil fuel industry out of business, thereby disincentivizing investments in oil and gas and driving up costs on the American people.
Decline is a choice, and it is one the Biden administration is making at the expense of the American middle class. It can blame Russian President Vladimir Putin all it wants. Its Marie Antoinette moment — “Let them buy electric vehicles” — is going to provoke a backlash.
Banning imports of Russian oil was the right thing to do — but it should be accompanied by expanding American energy production instead of relying on Venezuela, Iran and Saudi Arabia.
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