Democrats Make A Terrible — And Dangerous — Bargain With Oil And Gas

According to AAA, the average price for a gallon of gasoline in the USA is $3.70.

This is an astounding 101% increase from its low of $1.84 per gallon a little over two-and-a-half years ago. One driver for the increase in prices at the pump — which peaked at $4.92 per gallon in June of this year — can be explained by any Econ 101 student. It has to do with the basic formula of supply and demand.

In this case, however, it isn’t so much the supply of crude oil, from which gasoline and other fuels are distilled. Rather, it is the supply of money — more precisely U.S. dollars. As crude oil is priced in these same U.S. dollars, the more units there are in circulation, the more each barrel (bbl) will cost as the value of the currency for which it is exchanged is diminished through oversupply.

Pretty straight-forward right?

Therefore, one would think a powerful way to combat the high cost of crude oil, and thus ease the hit to the consumer at the pump, would be to not print any more of those devalued dollars. And yet, in classic 1970s style, the Democrats are doing just the opposite.

Although the rise in energy costs from the depths of the pandemic cannot be laid solely at Biden’s feet, his administration’s $780 billion Inflation Reduction Act (an Orwellian name if there ever was one) has ensured we will see high prices for the foreseeable future. How? By printing ever more dollars to fund its smorgasbord of spending money we don’t have.

The current administration seems to believe that ideological verve, and hand-outs to their green lobby, can overcome basic mathematics. It can’t. As such, the American consumer has been hammered by the highest inflation in forty years, and with little signs of let-up.

Furthermore, as the ominous warning from Westeros tells us, “winter is coming.” Should the season be harsh, it will come with some of the highest home energy bills this generation of consumers has ever faced.

So the Biden administration finds itself in a trap of its own making, just one month before the midterms. If the polls are to be believed — and the elections are free and fair — the Democrats face a tsunami of voter backlash as they bear the costs of profligate spending and energy policies hostile to maintaining U.S. energy independence.

So what is the Biden administration’s solution to higher energy prices? They seem to be trying a bit of Econ 101 of their own by increasing the supply of oil on the market through the depletion of the Strategic Petroleum Reserve (SPR). The White House announced that the Department of Energy is authorized to sell another 15 million barrels of oil from the SPR, offering that: “This sale will complete the historic, 180-million-barrel drawdown the President announced in the spring, which has helped to stabilize crude oil markets and reduce prices at the pump.”

What the proclamation leaves out is this unprecedented withdrawal will leave the SPR at its lowest level since July 1984! But not to worry, the White House continues, because Biden’s people plan on refilling the dwindling supplies as soon as crude oil prices dip below $72/bbl.

As of this writing, front month WTI crude futures — the global benchmark — are trading at $85.50/bbl. In fact, sub-$72 levels in the WTI cash market have not been seen since mid-December 2021 and indications are that we won’t be seeing these levels anytime soon … especially given that OPEC+ intends to reduce output, the pleas of a fist-bumping U.S. President aside.

No doubt, should crude prices dip below the $72/bbl level and the administration does, in fact, pull the trigger and begin scooping up product to replenish the drastically depleted SPR, the Democrats will hail this as a great victory for Biden’s market timing, etc.

This, of course, assumes the green snake that slithers through the halls of the Democrat-controlled Congress doesn’t bite its benefactors and thwart what it sees as a submission to a fossil fuels-based domestic energy policy. And if they did try, certainly the Democrats would hold fast and put the interests of national security and the average U.S. consumer above those who hold equity stakes in solar panel makers, electric car companies, and wind farms. Right? Not necessarily.

Set the way-back machine to March 2020 when Donald Trump sat in Biden’s chair. The Donald certainly has many faults, but lacking a keen sense of timing in the oil market apparently isn’t one of them. Back then, when oil was trading not at $72/bbl but rather below $25/bbl, Trump proposed taking advantage of the low prices due to the global shutdowns by restocking the SPR with some 77 million barrels.

Such an action would have effectively topped off the emergency supply, thereby placing us in a better position to

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