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Ignoring domestic energy comes at a cost

Between the Russia-Ukraine conflict, rising inflation coming out of the pandemic and the Biden administration’s push towards renewable energy, retail gasoline prices have reached record highs. Earlier this month, oil surged above $100 dollars per barrel for the first time since 2014. When President Biden took office in January of 2021, the average price per gallon was $2.37, however, that number has doubled to over $4 this year.

The administration continues to use Putin’s invasion of Ukraine as the scapegoat for the rise of energy costs. As Russia faces the consequences for its actions in Ukraine, the US and its allies must avoid collateral economic damage, specifically in the energy sector. Last year, eight percent of the United States’ oil and refined product imports came from Russia. Now that the Biden Administration has banned Russian oil and gas imports, they have turned to authoritarian leaders in Venezuela and Saudi Arabia in an effort to increase global oil production. This approach is not the most effective solution.

While Venezuelan President Nicolas Maduro said the two countries, “agreed to work on an agenda moving forward,” reports indicate that Saudi Arabia and the United Arab Emirates declined calls with President Biden. Seeking to replace the imports from Russia, as well as spur global production, the administration has ignored their best chance yet: galvanizing domestic production.

On President Biden’s first day in office, he revoked a cross-border presidential permit for the Keystone XL pipeline. The pipeline would have run from Alberta to the American Gulf Coast, carrying about 830,000 barrels of crude oil daily. That pipeline would have stimulated more North American energy investment, and it would have created thousands of American jobs. Instead, the pipeline is dead, gas prices are on the rise, and the U.S. is asking brutal regimes to help save the West.

Producing oil domestically puts people to work and helps local economies, while buying Venezuelan oil will enrich a regime accused of committing crimes against humanity. Slowing domestic energy production in the name of climate change, then lining dictators’ pockets to avoid a crisis, is beyond hypocritical.

The Biden Administration continues to move the goal posts. First inflation, then Vladimir Putin, President Biden has now shifted responsibility for the surge in gas prices to domestic oil companies. In a tweet from the official POTUS account, President Biden stated, “Oil prices are decreasing, gas prices should too. Last time oil was $96 a barrel, gas was $3.62 a gallon. Now it’s $4.31. Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.” This rationale goes directly against what the United States’ own Energy Information Administration (EIA) reports. Since gasoline is an internationally traded commodity, the price per barrel reflects the global market, not just our domestic demand for oil. Statistical analysis by EIA illustrates that around half the change in crude oil prices are passed onto retail prices within two weeks of the change. For the Biden Administration to pull a singular statistic of how price per barrel dropped below $100, and in turn pass blame onto the domestic energy sector for not reflecting this change immediately, is intentionally misleading.

In 2018, the U.S. Army Corps of Engineers conducted numerous studies of the Dakota Access Pipeline. They found that the pipeline poses no significant environmental risks and that the pipeline had not impacted groundwater since it began operation in June of 2017. However, last month FERC announced new policy changes to the way that the commission will consider new and pending applications. The policy applies a climate change litmus test to new pipelines, thus increasing the barriers to entry and impeding launch of new domestic projects.

While FERC regulates interstate transmission of oil and natural gas, the recent change in their policy appears to exceed their regulatory authority since the EPA regulates environmental risks. In order to avoid the energy crisis from growing anymore catastrophic, the administration must act with more readiness to approve more permits for pipelines. Similarly, the Dakota Access Pipeline must be allowed to operate without undue legal challenges to a pipeline described as “one of the most technologically advanced and safest pipelines ever built.”

A war between Russia and Ukraine should not have been the wakeup call for an administration that was already watching gas prices soar. Unfortunately, the situation has exposed America’s domestic energy shortcomings. Halting the Dakota Access Pipeline for additional environmental studies while asking regimes that dispute our democratic values is a disaster of our own making. The administration should recognize that and be reaching out to leaders in the domestic oil industry instead of Maduro and Mohammed bin Salman.

Guy Caruso is senior adviser (non-resident) in the Energy Security and Climate Change Program at the Center for Strategic and International Studies; former administrator of the U.S. Energy Information Administration (EIA) from July 2002 to September 2008.

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