Joe Biden’s impossible equation

In one year, the price of a barrel of oil in Texas has doubled to exceed $ 80 (about $ 69), that of gasoline at the pump has increased by half, while the gas heating bill of Americans is expected to increase by 30% this winter, according to the predictions of the EIA (Energy Information Administration). The surge in energy prices, in the midst of the post-Covid crisis, turns into a puzzle for the president, Joe Biden: first, it cuts the purchasing power of American households, who take back their cars to get to work; second, it increases inflation, which reached 5.4% year on year in September, which increases the risk of an interest rate hike by the Federal Reserve. So many complications one year from the mid-term elections.

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Against this backdrop, Biden is seeking lower energy prices. This summer he tried to pressure OPEC and Russia to increase oil production, so far without success. The Minister of Energy, Jennifer Granholm, considered, before changing her mind, for the moment, to release strategic stocks, but these are rather reserved for catastrophes – the shutdown of the refineries in Texas in the event of major hurricane – and a barrel price above $ 80 is hardly exceptional. A third avenue has been to ban hydrocarbon exports, as was the case between 1975 and 2015.

Economic and legal uncertainties

In reality, Joe Biden is caught between his policies in favor of phasing out fossil fuels and the reality on the ground. Upon his arrival at the White House, the president blocked the Keystone XL pipeline that was to carry Canadian shale oil to the Gulf of Mexico, suspended or obtained the suspension of offshore or Alaska exploration licenses, and announced, within the framework of the return of the United States, in the Paris agreement on the reduction of greenhouse gases, the carbon neutrality of the country by 2050. Result, this war against the oil tankers, made of economic uncertainties and legal, is starting to bear fruit. The White House has made contact with the oil producers, causing the Wall Street Journal (WSJ): “All of a sudden, Biden likes shale prospectors. “

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Shale oil and gas producers did not take over and start producing immediately despite the price hike. “We are not going to run after prices. We know we can’t count on $ 80 for eternity. When the oil flows, it will be 60 dollars ”, explained to WSJ Ryan London, CEO of Colorado firm Tap Rock Resources. For the past ten years or so, these small independents and their shareholders have been scalded: they have produced excessively, going into debt, and have never really made any money. “Excessive investments have led to too low profits. I don’t see a scenario where we would come back to crazy spending ”, told the WSJ Chris Wright, CEO of Liberty Oilfield.

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