Economist Calls Biden’s Explanations For High Energy Prices A ‘Lot Of Hooey’

In responding to the cause of high energy prices, President Joe Biden has blamed the invasion of Ukraine, price gouging and not drilling on U.S. leases. A leading economist says those are just excuses, and it's his policies that are to blame.

February 25, 20236 min read

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ORLANDO–As the cost of energy began to hit Americans in the wallet, President Joe Biden’s administration blamed the invasion of Ukraine, price gouging by oil companies and those companies not using the existing leases they have. 

Dr. Ben Zycher, an economist and senior fellow with the American Enterprise Institute, a free-market think tank, called these excuses “a lot of hooey” at a panel discussion Friday on energy scarcity at the the Heartland Institute’s International Conference on Climate Change in Orlando, Florida. 

No Correlation

Zycher previously was an intelligence community associate of the Office of Economic Analysis for the U.S. Department of State. He was a senior economist at the RAND Corporation, and a former adjunct professor of economics at the University of California Los Angeles.

Zycher said that gasoline prices are not a bad proxy for energy prices overall. They’re not exactly the same, but he said they serve well in discussing the larger impact of policy on the industry as a whole. 

As much as the Biden administration blames Russian President Vladmir Putin’s decision to invade Ukraine for energy costs, Zycher explained, there’s no correlation between the two. 

After Biden was inaugurated in January 2021, gasoline prices were a bit under $2.50 per gallon. A year later, they had increased to $3.41 per gallon. It was another five weeks before the invasion of Ukraine began in February 2022, and by that point gasoline prices were 21 cents higher than a month before. Prices then peaked in June 2022, well over a year later, at $5.07 per gallon. 

They’ve gradually declined to about $3.50 per gallon last week.

“Gasoline prices increased, more or less [steadily] from December 2020, just before after the inauguration of Mr. Biden to June 2022,” Zycher said. 

Market Dynamics

On the argument that oil companies are price gouging, Zycher said the data doesn’t support that, either. 

Global energy demand, Zycher said, moves proportionally with global GDP growth. 

“That is just the reality and the market dynamic,” the economist explained. 

After the world began to move out of the Covid pandemic and GDP began to grow, demand for consumption grew along with it. 

“So the price gouging and profiteering argument doesn’t make any sense at all. What we’re seeing and have seen and will continue to see is consumption, production, and prices moving along with market conditions,” Zycher said. 

Thousands Of Leases

The Biden administration has issued the fewest number of leases on public lands of any president since World War II. 

Biden was criticized for not issuing more lease sales, which was limiting the supply as demand rose. The administration responded by claiming that oil companies weren’t using thousands of leases they currently held, so it was, Biden argued, the oil companies’ fault. 

Zycher said that of 37,500 leases that were in effect, about 76% of those were utilized, which is a historically high number. 

He said holding a lease doesn’t actually start any oil production.

“A lease isn’t a permit,” he said.  

A number of impediments to utilizing a lease make holding it a small step in a long process, Zycher said.  

Environmentalists groups often stop production on existing leases with litigation efforts. Here in Wyoming, the Powder River Basin Resource Council teamed up with the Western Watersheds Project to sue the Bureau of Land Management as it began permitting hundreds of wells in a project with 5,000 leases. 

Leases also require legal reviews under the National Environmental Protection Act, which can take years or a decade. 

“The ‘thousands of leases’ excuse really doesn’t hold water,” Zycher said. 

Higher Returns

Zycher also discussed the impact of the administration’s policies on the oil and gas industry. Besides limiting what they can do, financial policies have also limited the companies’ access to capital. 

He said the upper limit of medium-term U.S. oil production is about 13.5 million barrels per day. But companies are looking at what the likely market expectations will be in the future. Due to climate policies, production is likely to decline, Zycher explained, which will result in increases in the price of oil. 

If the price of oil is going to rise higher than the price of interest, it doesn’t make sense to invest in more production today, Zycher said. 

“You can sell your oil today, but the dollars in the bank earn 5%. Or you can keep it in the ground and plan to sell in the future, when you’d expect to earn 10%. So what do you do?” Zycher said. 

Lack Of Knowledge

Zycher told Cowboy State Daily he wasn’t entirely sure why the national media outlets have largely reported these excuses as fact with little pushback. 

“I’m hardly an expert on the mass delusions of crowds,” Zycher said, adding that a big part of it is lack of analytical rigor and knowledge. “I think the market for objective reporting is smaller in some loose sense than it used to be. And that’s very, very unfortunate.” 

As an example, he said a reporter from E&E News contacted him a couple years ago. The outlet is owned by Politico. 

“That is a group of true believers in a kind of environmental climate religion,” Zycher said. 

He said the reporter was “perfectly pleasant” and asked a series of questions, which he answered. 

When Blackouts Begin

After the interview, he asked the reporter off the record if she had ever asked in her interviews with people who support the Biden administration’s policies, what the impact on global temperatures would be by the year 2100, if the policies were implemented immediately.

Zycher said the impact would be a reduction of 0.17 degrees, barely detectable even under the most favorable assumptions.

The reporter said she had never asked that question.

“That woman is now the overall editor for climate reporting at The Washington Post,” Zycher said. “That tells you everything you need to know about the ignorance” in the media. 

Zycher said that things will eventually change, when people impacted by these policies start asking the question that the media aren’t right now. 

“I think when the … the blackouts begin, and things really start to head south, you’ll start to get people questioning the dogma more. Because it’ll be in their interest to do so,” Zycher said.

Cowboy State Daily energy reporter Kevin Killough is attending the Heartland Institute’s International Conference on Climate Change in Orlando, Florida.

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