The price of energy is too high —way too high. It’s over $100 a barrel for oil.
It’s near $5 a gallon for gasoline. It's been an important contributor—though by far not the dominant contributor to the 8% inflation rate of the past year.
By the way, a new study suggests that the inflation story has added a $5,200 tax on typical American families. This has got to change. Everybody knows it has to change.
Today Joe Biden, who erroneously blames high energy costs on Vladimir Putin and American fossil fuel companies, came up with a new gimmick. It's kind of an adult toy. It's call SPRO—the Strategic Petroleum Reserve.
He announced today his administration will release one million barrels of oil daily from SPRO for up to six months.
Oil prices fell $7 to around $100 today on the news. Stocks fell about 250 points.
Mr. Biden says that will cut gasoline prices 10 to 35 cents. I'm taking the under. We will see. Here are some numbers:
First, the strategic reserve currently has 568 million barrels. It could sell as much as 4.4 million in the first few days, according to the U.S. Energy Information Agency, but bear in mind that the sell rate will slow as the oil caverns supply diminishes. Let’s just work off of a million barrels a day. That would be 30 million barrels a month, which would be 180 million barrels over 6 months.
Now, the world supply and demand balances at roughly 100 million barrels a day. That would come to 3 billion BPDs per month, which in turn would be 18 billion BPDs for 6 months.
So, Mr. Biden's gimmick plan would add 180 million barrels per day compared to a world supply of 18 billion over the 6-month period. Kind of like spitting in the wind, isn't it? A pea in a pod, a pebble in the ocean. We'll see if there's any additional falling oil price effect after today's drop on the news—doubtful.
Of course, the oil reserve is supposed to be there to protect against national disruptions in supply, either from huge natural disasters or war. It's really a national security tool, not meant to manipulate oil prices in the short-run.
Today, of course, Biden blamed Vladimir Putin and oil companies for the high price of oil and gasoline. Of course, he does. It’s what we love about him.
He is consistently selling falsehoods. It's actually the only consistency he has in an otherwise incoherent and bewildering policy approach.
Consider the following: on his very first day in office, Joe Biden canceled the Keystone XL Pipeline, ended ANWR drilling in Alaska and instituted a phony metric called the "social cost of carbon," which pretends to capture upstream production costs and downstream consumer uses, measured over centuries. Think about it! It cannot be done.
This whole jihad against fossil fuels throws a wet blanket over the entire oil and gas industry, which was, by the way, not only the best in the world, the most affordable in the world and actually the cleanest in the world. U.S. carbon emissions have been falling for years. Then came the Biden regulatory octopus with tentacles reaching everywhere to stop fossil fuels.
The Federal Energy Regulatory Commission (FERC) has essentially banned new pipelines. The Interior Department has stopped drilling on federal land. The Energy Department has frozen LNG export projects. The EPA has reinstituted burdensome standards for the Endangered Species Act, the Clean Water Act and the Migratory Bird Treaty Act. NEPA permitting reform has been thrown out the window.
Even now, with a so-called NATO task force to supply more LNG to Europe, the fine print of the document insists on the same regulatory framework that will get the U.S. toward net-zero carbon emissions in eight years.
These are all reasons why U.S. oil production is a million and a half barrels below its peak in early 2020. Today, President Biden couldn't resist his usual jihadist attack against America's great fossil companies. Take a listen:
PRESIDENT BIDEN: I'm calling for 'Use It or Lose It' policy. Congress should make companies pay fees on wells on federal leases they haven't used in years and acres of public land they're hoarding without production.
So goes Biden's fatwa against fossil fuels. So, let me get this right. Even though the oil companies have leases, the regulatory octopus including FERC, Energy Department, Interior Department, EPA, SEC, and Federal Reserve won't provide the permits, or the pipelines, or the financing for those projects. It's a classic bait and switch.
Uncle Sam gave him the leases, but then said, "Uh, uh, no permits, no pipelines, no funding. So, we're going to impose a fee on you!" That fee comes on top of the 11 tax hikes targeting fossil fuel companies in Biden's budget and those come on top of the tax attack on corporations, small businesses, capital gains and confiscatory wealth through unrealized capital gains.
To be clear, Inflation is being driven by big government socialist deficit spending financed by Federal Reserve money printing. The inflation rate has moved up from under 2% to over 7% before Vladimir Putin invaded Ukraine, but inside this inflation surge, the high cost of energy has played a major role. It has undermined our economic security at home and our national security abroad.
It plays right into the hands of war criminal and crook Vladimir Putin. Gasoline prices jumped 40% before Putin went into the Ukraine. Oil prices jumped nearly 70%.
These anti-fossil regulatory policies are a self-inflicted wound. We are never going to replace oil and gas. Let’s face that fact honestly. The Bank of America has estimated that achieving net-zero carbon emissions will cost $150 trillion over 30 years. That’s an annual cost of $5 trillion alone.
Of course, inflation would be turbo-charged. Millions of jobs will be lost. The economy will sink. America will be vastly weaker. This is a price we do not have to pay. Save America. Drill, drill, drill. The cavalry is coming!
This article is adapted from Larry Kudlow's opening commentary on the March 31, 2022, edition of "Kudlow."