US President Joe Biden threatens the oil industry that if they don’t lower the price for the public, he will raise their tax. In a tweet he published on Twitter, the president said: “The oil industry has a choice. Either you invest in America by increasing production and lowering prices for consumers or pay higher taxes on your excessive profits, and face other restrictions.”
This is somewhat belligerent language on the part of President Biden, and apparently it can be said that a conflict is brewing between the American oil industry and the Biden administration, when energy prices in the world are high, at the same time as high inflation. But the White House is trying to calm down today and say that the reports about the tensions are exaggerated. We will return to this later.
In the oil industry, on the other hand, they say that a tax that is too high not only will not help the industry, but is the one that will lead to damage to production and investments. And in any case – it is likely that Biden’s threat is mainly a pressure tactic than a concrete policy proposal for the near term. In a week the mid-term elections will be held and if the Democrats lose the majority they will not really be able to promote such legislation.
But what is interesting is President Biden’s change of attitude. Although Biden allegedly threatens the major oil companies (which also presented excellent and high results in the last quarter, thanks to the high oil prices), but if a year or two ago he was against the industry, if during his election campaign he took a hard line against these companies and since taking office he has tried to reduce activity and set regulations to harm the exploration and production of oil and gas, so now he is actually working to increase its activity – provided that it works for the benefit of the citizens, as he perceives it (lowering prices for the consumer).
As you may remember, Biden was eager to promote the issue of renewable energies. He set a goal for the US of zero carbon dioxide emissions in electricity production processes for the year 2035 and zero emissions for the entire economy by 2050.
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The problem is, of course, that dreams of a clean climate are nice, but reality must also be considered. Beyond the fact that China and India are two of the biggest polluters in the world – and they currently have no intention of slowing down, on the contrary – so even the Western countries still cannot give up the fuel industry. They can reduce, but at this stage it is still impossible to build the largest economies in the world on the renewable energy industry. Despite all the large investment, the renewed industry is still in its infancy, and here we saw in the last year in Europe how the industry cannot satisfy all the needs, and how European countries actually depend on the kindness of Russia in terms of supply. The oil industry also says that it was the Biden administration’s attempts to slow down the oil and gas industry that led to the shortage of energy supply and the higher prices.
Bottom line, the result on the ground is that Western countries have had to reopen coal and nuclear plants that they closed. So what is the wisdom? It would have been better for them in advance to take more measured steps and make sure that the new industry is indeed capable of replacing the old industry in a sufficiently good manner. But they didn’t do it, and now Europe is afraid of a cold winter and a shortage of fuel and the shortage is very noticeable on the continent, when places like are darkened and the heating is done sparingly, and the winter is just beginning.
Biden himself had to change his position regarding natural gas about six months ago and promised Europe (following the war in Ukraine and the shortage of gas in Europe) to increase the export of natural gas to the continent.
The oil industry has a choice.
Either invest in America by lowering prices for consumers at the pump and increasing production and refining capacity.
Or pay a higher tax on your excessive profits and face other restrictions.
— President Biden (@POTUS) October 31, 2022
Biden’s adviser tries to reassure: “We are not against profits”
So after the president’s tweet yesterday, the White House is trying to reassure the public. White House spokeswoman Karin Jean-Pierre says today that White House officials meet frequently with the oil industry, but she says the president expects them to act.
Earlier today, the president’s adviser, Amos Hochstein, said that the administration and Biden are not opposed to the oil industry making a profit. According to him, the Biden administration is not ‘anti-profit’ or ‘anti-free market’ but he would like to see the oil companies invest their profits in improving oil production and energy security of the US, and also lower prices for consumers.
Hochstein openly admitted that the president had changed his attitude. According to him, “It is no secret that the Biden administration and the oil industry do not see eye to eye on the long-term role that oil will play in the economy. However, we must do two things. We need more investment in oil production and refining, now.”
Hochstein said that he himself talks with CEOs of the oil industry, and other senior government officials also talk to them regularly. “People know that. I don’t think that’s the problem. The problem is this: we want them (the oil companies) to increase their investment. The price environment in the last year is suitable for investment. So take the profits you earn and invest them.”
Of course, these are different economic approaches. The Democrats in Congress (to which Biden himself also belongs) claim that the managers of the oil companies prefer returns to shareholders over lowering prices for the consumer (by increasing production – that is, increasing supply and prices will fall anyway). They say something like – it’s okay to give a return to shareholders but not excessively. It’s just that the Democrats forget that in practice, letting the shareholders share the pie in a better way than in the form of a discount at the gas stations. The return to the shareholders reaches the entire public – through their pension holdings and investments, while lowering prices at gas stations reduces profits for companies and is distributed unequally precisely in favor of those who are richer and drive more cars.
ExxonMobil’s CEO, Darren Woods, said last week that his company’s goal is both to take care of its shareholders’ returns and to improve production, regardless of who is in the White House. “We’re not really looking to satisfy one government or another. We try to make sure we are doing the best we can while using our shareholders’ money appropriately, and find beneficial projects that allow us to increase production and increase value. We are also looking at how to reduce our emissions.
ExxonMobil reported record profits of $19.7 billion in the third quarter, Chevron recorded profits of $11.23 billion. In the past two quarters, Chevron, ExxonMobil, ConocoPhillips and Britain’s BP and France’s Total earned more than $100 billion — more than they earned in all of 2021.