By Nathan Barton
Some time ago, a reader (Tom Knapp, I think) made a comment worth revisiting given the Biden regime push against oil (and gas) and the rapid inflation in oil and gas prices. Are we now performing the experiment he suggested?
Oil is probably the single most subsidized commodity on Earth and American oil is the single most subsidized version of it. US energy policy over the last several years has been aimed pretty much entirely at keeping the price of oil artificially high enough to make US shale production, etc. profitable — with one variant, that being to try to find a way to seize Venezuela’s ultra-cheap, dirty crude so that it can be mixed with America’s ultra-expensive but clean shale to produce a refinery-quality happy medium. Tear the oil welfare queens off the US government teat and see if they can compete with wind and solar any better than they can compete with foreign oil without Uncle Sugar’s help.
Tom has great insight. The Biden regime’s decision to go beg for Venezuelan oil supports his analysis from months ago.
I really don’t know enough about the policy side of things to agree or disagree with him. As I told him, I know that the small producers that I know and work with/around in the Four Corners states and Wyoming are not getting any government subsidies – at least not directly. That goes to the big boys. Indeed, a very large part of Wyoming’s total taxes (25%+) comes from oil/gas production (especially with the decline in coal). And the folks I work with are mostly the small-fry.
(I’m not hobnobbing with the likes of ExxonMobil or BP-Amoco – just drillers and engineers and production superintendents and the like, independent producers and wildcatters. And the contractors which provide services for them.)
But the small fry are sweating buckets, for the third year in a row.
All of them were badly hurt by the Pandemic Panic and the Lockdown – indirectly since most (working in the field, mostly) were not subject to the mask mandates and all the rest. And all oil and gas people are hurt by the ridiculous, extreme market volatility recently. Yes, even today with oil over a buck – but with Diesel at $6+ a gallon and everything else going up in cost, too. Back in 2020, many were laid off for going on two months or more and some again in 2021.
The people I know in oil and gas in Texas and Louisiana (again, technical folks and front-line supervisors) are glad that no oil is showing up from Venezuela. And disgjust It is such incredibly nasty stuff and hard to work with – very expensive to process even with blending. If any of them applauded Trump’s threats against Venezuela, it probably was not because their companies and bosses were lusting after crude oil, but because they know people suffering in Venezuela.
I am sure many of you have both seen a lot of claims about what FedGov policy was and is concerning Venezuela – which mostly disagree with each other. (Except, as is usually the case with the FedGov, the policy is messed up.) What do I know about Venezuela (oil and otherwise), from friends and relatives there and nearby? Although the US has made it worse, the Venezuelan government is responsible for the mess. Of course, under Uncle Joe, Venezuela HAD dropped off the radar. Uncle Joe just didn’t seem to have been told what his position should be. At least until the Russia scare and more stupid government actions came up in the last four weeks.
I have been told, by a number of fairly reliable sources in mineral and petroleum economics, including some that are as deeply anti-government as TPOL and at least fairly libertarian, that the Saudis need a price of $80+ per barrel to run (ruin) their country. And NOW they have it. Courtesy of the Western Powers’ panic over Ukraine. Even without the FedGov subsidies, I think that North American oil can compete easily at the current price. I suspect that the bigger players (ExxonMobil, ConocoPhillips, Shell, etc.) are reveling in it. They have now accomplished what SEEMS to have been their goal for over two years now.
And right now, as the price of oil has exploded, the Saudis (and “Big Oil”) are getting their wish, it seems. Suddenly, courtesy of Moscow (or Brussels and London and DC), happy times are here again for the Saudis. And for Nigeria. And maybe even Venezuela.
But NOT for Alberta. And not really for North Dakota and Montana, or even Colorado or New Mexico, or even Texas. Many fear the other shoe will drop!
At the same time, this gives “Big Oil” and “Big Government” the perfect excuse for the subsidies Tom (and many others) are incensed over. Yeah, some of the current regimes’ environist extremists are ticked off, but the war fever over Ukraine blunts much of that.
The real losers are definitely the people and small businesses right here in the Fifty States: courtesy once again of the FedGov, its allies in big business and Wall Street and even overseas. Combined with the supply chain problems, the hangover from the Pandemic Panic, and the hyping of war fears? Not good news for freedom or liberty or prosperity.