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November 3, 2022

On October 19, in the heat of an election campaign, President Biden told the American people, “We need to increase oil production.”  He went on to say, “My administration has not stopped or slowed U.S. oil production.”  It was a disingenuous statement from a man whose sense of reality, fact, and fiction have become an undecipherable narrative.  Biden failed to mention the executive order he issued which stipulates, “the Secretary of the Interior shall pause new oil and natural gas leases on public lands or in offshore waters.”  This pause is ongoing.  Biden uses the same executive order as an instruction to the secretaries of State, Treasury, Energy, Defense, and Homeland Security, “to organize and deploy the full capacity of its agencies to combat the climate crisis.”

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Millions of Americans are employed by businesses supporting the fossil-fuel industry.  Others choose to invest in fossil-fuel businesses.  All Americans rely on fossil fuels to power their businesses, transportation systems, and utilities.  Democrats will destroy these people’s jobs, capital, and imperil the U.S. economy.  The Biden administration decreed that, “we must combat the climate crisis with bold, progressive action that combines the full capacity of the Federal Government with efforts from every corner of our Nation, every level of government, and every sector of our economy.”  By executive order Biden has weaponized the federal bureaucracy to destroy the fossil-fuel industry. 

The Energy Independence and Security Act of 2007 (EISA) makes the business of refining oil difficult.  The law provides broad powers to the EPA.  It “directs the EPA Administrator to revise regulations to ensure that domestic transportation fuel sold or introduced into commerce, on an annual average basis, contains a specified volume of renewable fuel.”  The George W. Bush Administration and a bipartisan majority in Congress enacted the EISA providing authority to the EPA to dictate terms for the blending of renewable fuels in refineries.

In 2021, 13.9 billion gallons of ethanol were blended into gasoline.  Unfortunately for refiners, they were mandated by the EPA to blend 20.17 billion gallons.  Since there was a shortfall in EPA mandated ethanol consumption in 2021, refiners had to purchase Renewable Identification Numbers (RINs) credits to make up the difference.  Each gallon of ethanol produced as a biofuel for blending  comes with a D6 RIN.  Each refiner/blender has a quota imposed by the EPA based on its annual mandate and the production capacity of the refinery.  If the refinery blends more than its quota, the surplus RINS may be sold as credits on the market.  If the refinery blends less than its quota, it must purchase RINS to make up the difference.  If no RIN credits are available on the market, they may be bought from ethanol producers.  In 2021 refiners had to purchase RIN credits for 6.27 billion gallons of ethanol and other biofuels they did not consume.  RIN credit costs vary as they are part of a RIN market that fluctuates.  In 2021 D6 RIN costs ranged between $.20/gallon and $1.20/gallon. A conservative estimate of RIN credit costs to refiners in 2021 is $6 billion.  This cost is passed on to consumers in the price of gasoline.  If the cost can’t be passed to the consumer, it comes out of the refiner’s margin.  

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Biden could correct this EPA scheme and reduce the cost of gasoline if he wanted to.  He would rather pursue a green agenda than support the American people.  Robert Wagner on Seeking Alpha said the EPA’s RIN scheme, “is totally unique for the US free market economy. Socialists are always claiming socialism will work… the (Renewable Fuel Standard 2) RFS2 is an attempt to prove to the socialists that socialism can work… if paid for by the abundant wealth of a capitalist host.”

It’s been a goal of Democrats since the liberal heyday of the Obama administration to establish a cap-and-trade scheme to subvert fossil fuels.  After the EPA put such a scheme in place, the state of West Virginia sued the EPA asserting the agency had no authority to implement their plan.  The Supreme Court agreed with West Virginia.  In the majority opinion Chief Justice John Roberts wrote, “it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme….  A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”

The EPA is also out to stop oil drilling.  The federal government can’t easily stop oil drilling in Texas and other states in which oil and gas operations are on private, not federal property.  The Permian Basin is the most prolific producer of oil and gas in the U.S., accounting for “nearly 40 percent of all oil production in the United States and nearly 15 percent of its natural gas production.”  In 2021, the Permian Basin produced 3,460,555 barrels of oil/day and 24,103,872 mcf of natural gas/day.

The EPA finds this unacceptable and may try to stop drilling in the Permian Basin.  EPA spokeswoman Shayla Powell told the Odessa American that, “Because of the high ozone levels, the EPA is considering a redesignation to non-attainment for portions of counties in New Mexico and Texas located in the Permian Basin.”  The Interior Department has “paused” drilling in the New Mexico portion of the Permian Basin, since this is federal land.  Now the EPA is looking for ways to shut down drilling in the most important oil and gas producing basin in the U.S.

Democrats are fortunate the midterms are this Fall.  Energy prices will spike this winter in the U.S.  Michael Ferrante with the Massachusetts Energy Marketers Association said, “The facts are this, supplies of heating oil are historically low.”  The New Hampshire Journal also noted, “ISO New England, the region’s power grid operator, warned last week the tight supply of natural gas could result in rolling blackouts this winter if the weather turns unusually cold.”  Diesel is in short supply and rising in cost.  Oil prices will likely increase after Biden ends sales from the Strategic Petroleum Reserve and OPEC decreases production, removing 2-3 million barrels of oil per day from global markets. After undermining the oil and gas industry to restrict production, causing prices to increase, Biden wants to levy a windfall profit tax on the industry.  This will do nothing to increase production.

Democrats are panicked in an election year.  Their intentional destruction of fossil fuels is causing shortages of refined products and spiking prices.  If Democrats are allowed to continue pursuing their agenda, the fossil-fuel industry will collapse under the weight of government tyranny.  Liberal politicians must be removed from positions which enable them to direct their irrational policies to an activist bureaucracy.  If given a chance, conservatives must pass laws that redirect government to support free markets and to put the American people first.