Michael Adkins
The impact of the global pandemic is still being felt economically, in spite of the great increases in jobs and the economy. When consumer demand is far greater than output, inflation is the inevitable result. The price of gasoline when rising plays an outsized influence on how we view the economy and especially inflation. Today’s price at the pump certainly impacts us significantly, and inflation is no laughing matter. But we would be wrong to overreact and place blame where it does not belong.
From my experience, I find that we always and erroneously blame the current resident of the White House for high gas prices. With the possible exception of former Secretary of State Henry Kissinger’s ignoring the Saudi leaders saying they wanted to drastically curb oil production in the 1970s, no American Presidential administration has been much of a factor in the price of oil. Rather than look for someone to blame or simplistic answers to the problem of the price of fuel, we’d be better off if we understood what actually caused the rise and what can realistically be done about it.
Understand that oil prices have been steadily rising since November of 2020. In April of that year OPEC, after a dispute with Vladimir Putin, cut its production levels significantly over concerns about Covid-19’s impact on consumer demand. OPEC was correct. Consumer demand tanked along with the economy. The result was record low oil per barrel pricing. With the near recovery from the worldwide pandemic, consumer demand has again risen sharply. Oil production, on the other hand, has not met the increased demand. That simple rule of supply and demand is the foremost factor in today’s high fuel prices.
If you think the answer is “drill baby drill,” consider this. We are already the world’s largest oil producer, and the U.S. oil rig count is at 520 now, up from 295 in 2021. But during the pandemic, major oil producers eliminated thousands of their employees and have been slow to bring them back. What many of Big Oil’s companies have done instead, is to take the profits from rising oil prices and bought back their company stocks to further enrich their pockets. Further, as Mac McClain, Chief Investment Officer for Frost Investment Advisors has noted, “the oil majors are reluctant to increase exploratory spending … a trend that’s been growing since 2015.” With the rising demand for electric vehicles and more ecologically friendly sources of energy, such an increased investment is risky at best.
Many, especially Republicans, demand a reopening of the XL pipeline. There is, however, a simple explanation why that is not the answer. First, pipelines do not produce oil, they merely move them to refineries. Secondly, the XL was only designed as a short-cut from Canadian oil fields, not for an increased flow. Thirdly, it was only 8% completed when President Biden stopped construction. It would take several years to complete its construction should it be reopened. Further, not even the Keystone Pipeline flows at near capacity.
While Putin’s invasion is one factor in our higher prices at the pump, we can better serve our nation by being patriotic and realize that we are paying a cost of defending freedom across the globe. Rather than lay a trap as the GOP has done by demanding oil sanctions against Russia and then blaming Biden for the rising cost, our officials should be working in a bipartisan manner to reduce both the cost of fuel and our national dependence on it. Moving away from fossil fuel dependence will greatly strengthen our hand against the ills of inflation.
Michael Adkins formerly was chair of the Hancock County Democratic Party. Send comments to [email protected].
